The forward premium anomaly, i.e., the empirical evidence that exchange rate changes are negatively related to interest rate differentials, is one of the most robust puzzles in financial economics. We add to this literature by recasting the underlying parity relation in terms of cross-country...

This paper presents a general, nonlinear version of existing multifactor models, such as Longstaff and Schwartz (1992). The novel aspect of our approach is that rather than choosing the model parameterization out of thin air,' our processes are generated from the data using approximation methods...