We explore the motivations for borrowers to raise foreign currency debt and swap the proceeds into local currency, rather than borrowing the local currency directly. The growing, and in some markets large, volume of such opportunistic swap-covered borrowing, suggests that it can be a...

This paper employs a risk-augmented asset price model of the exchange rate to compare the risk and return characteristics of a range of Asia-Pacific USD currency pairs. The Asia-Pacific currencies include a full range of exchange rate regimes, so provide a broad perspective of exchange rate...

No-arbitrage implies a close link between exchange rates and interest returns, but evidence of that link has been elusive. This paper derives an exchange rate asset price model with consumption-risk adjustments. Interest rates and exchange rates reflect common risks which bias their reduced-form...