In this paper we investigate the relationship between risk premium and a time-varying conditional variance of spot rate using weekly Swiss franc/US dollar exchange-rate data. First, we apply an EGARCH-in-mean framework to test the unbiasedness hypothesis of the forward rate with a volatility...

In this paper we investigate the relationship between the term premium and the volatility of the short interest rate by applying a single equation EGARCH-in-mean model as well as bivariate seminonparametric nonlinear impulse response analysis to weekly Swiss data over the period from 1978 to...

A common model for security price dynamics is the continuous time stochastic volatility model. For this model, Hull and White (1987) show that the price of a derivative claim is the conditional expectation of the Black-Scholes price with the forward integrated variance replacing the...

The prominent Milgrom-Stokey no-trade theorem shows that differences in private information alone cannot give rise to trade among fully rational agents. In this note we demonstrate that similar no-trade results hold as well for a model introduced recently by Blume, Easly and O'Hara although in...