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Regime-Switching Behavior of the Term Structure of Forward Markets

Branson, Elena Tchernykh - 2006

This paper presents techniques for modelling and estimating the behavior of financial market price or return differentials that follow non-linear regime-switching behaviour. The methodology to be used here is estimation of variants of threshold autoregression (TAR) models. In the basic model the...

Persistent link: https://www.econbiz.de/10012783699

The Forward Premium Puzzle in a Two-Country World

Martin, Ian - 2011

I explore the behavior of asset prices and the exchange rate in a two-country world. When the large country has bad news, the relative price of the small country's output declines. As a result, the small country's bonds are risky, and uncovered interest parity fails, with positive excess returns...

Persistent link: https://www.econbiz.de/10013118842

Risk and Exchange Rates

Obstfeld, Maurice; Rogoff, Kenneth S. - 2021

This paper develops an explicitly stochastic new open economy macroeconomics' model, which can potentially be used to explore the qualitative and quantitative welfare differences between alternative exchange rate regimes. A crucial feature is that we do not simplify by assuming certainty...

Persistent link: https://www.econbiz.de/10013232899

The Out-of-Sample Success of Term Structure Models as Exchange Rate Predictors : A Step Beyond

Clarida, Richard H.; Sarno, Lucio; Taylor, Mark P.; … - 2021

A large literature suggests that standard exchange rate models cannot outperform a random walk forecast and that the forward rate is not an optimal predictor of the spot rate. However, there is evidence that the term structure of forward premia contains valuable information for forecasting...

Persistent link: https://www.econbiz.de/10013220936

Monetary Policy with Flexible Exchange Rates and Forward Interest Rates as Indicators

Svensson, Lars E. O. - 2021

In the new situation with flexible exchange rates, monetary policy in Europe will have to rely more on indicators than previously under fixed rates. One of the potential indicators, the forward interest rate curve, can be used to indicate market expectations of the time-paths of future short...

Persistent link: https://www.econbiz.de/10013214576

Rational Inattention : A Solution to the Forward Discount Puzzle

Bacchetta, Philippe - 2005

The uncovered interest rate parity equation is the cornerstone of most models in international macro. However, this equation does not hold empirically since the forward discount, or interest rate differential, is negatively related to the subsequent change in the exchange rate. This forward...

Persistent link: https://www.econbiz.de/10012784266

The Term Structure of Forward Exchange Premia and the Forecastibility of Spot Exchange Rates : Correcting the Errors

Clarida, Richard - 2010

We present theory and evidence that challenges the view that forward premia contain little information regarding …

Persistent link: https://www.econbiz.de/10012763403

The Term Structure of the Forward Premium

Hakkio, Craig S. - 2013

. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term … expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions … indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada …

Persistent link: https://www.econbiz.de/10012754712

Fixes : Of the Forward Discount Puzzle

Flood, Robert P.; Rose, Andrew - 2021

Regressions of ex post changes in floating exchange rates on appropriate interest differentials typically imply that the high- interest rate currency tends to appreciate, the `forward discount puzzle.' Using data from the European Monetary System, we find that a large part of the forward...

Persistent link: https://www.econbiz.de/10013310558

An Efficient Generalized Discrete-Time Approach to Poisson-Gaussian Bond Option Pricing in the Heath-Jarrow-Morton Model

Das, Sanjiv Ranjan - 2021

Term structure models employing Poisson-Gaussian processes may be used to accommodate the observed skewness and kurtosis of interest rates. This paper extends the discrete-time, pure-Gaussian version of the Heath-Jarrow-Morton model to the pricing" of American-type bond options when the...

Persistent link: https://www.econbiz.de/10013249269