A basic tenet of lognormal asset pricing models is that a risky currency is associated with low pricing kernel volatility. Empirical evidence indicates that a risky currency is associated with a relatively high interest rate. Taken together, these two statements associate high-interest-rate...

A basic tenet of lognormal asset pricing models is that a risky currency is associated with a low pricing kernel volatility. Empirical evidence implies that a risky currency is associated with a relatively high interest rate. Taken together, these two statements associate high-interest-rate...