Foreign Exchange Risk Premium Determinants
Title | Foreign Exchange Risk Premium Determinants PDF eBook |
Author | Tigran Poghosyan |
Publisher | |
Pages | 37 |
Release | 2006 |
Genre | |
ISBN | 9788073440831 |
Determinants of the Foreign Exchange Risk Premium in Gulf Cooperation Council Countries
Title | Determinants of the Foreign Exchange Risk Premium in Gulf Cooperation Council Countries PDF eBook |
Author | Mr.Tigran Poghosyan |
Publisher | International Monetary Fund |
Pages | 26 |
Release | 2010-11-01 |
Genre | Business & Economics |
ISBN | 1455209554 |
This paper analyzes macroeconomic determinants of the foreign exchange risk premium in two Gulf Cooperation Council (GCC) countries that peg their currencies to the U.S. dollar: Saudi Arabia and the United Arab Emirates. The analysis is based on the stochastic discount factor methodology, which imposes a no arbitrage condition on the relationship between the foreign exchange risk premium and its macroeconomic determinants. Estimation results suggest that U.S. inflation and consumption growth are important factors driving the risk premium, which is in line with the standard C-CAPM model. In addition, growth in international oil prices influences the risk premium, reflecting the important role played by the hydrocarbon sector in GCC economies. The methodology employed in this paper can be used for forecasting the risk premium on a monthly basis, which has important practical implications for policymakers interested in the timely monitoring of risks in the GCC.
Exchange Rate Risk Premium
Title | Exchange Rate Risk Premium PDF eBook |
Author | Guillermo Benavides |
Publisher | |
Pages | 43 |
Release | 2016 |
Genre | |
ISBN |
The objective of this paper is to analyze what are the main determinants of the exchange rate risk premium (ERP). The empirical case is conducted for the daily Mexican peso-USD for a simple period from 2007 until 2015. According to the results the ERP is influenced by several financial variables which are the VIX, a carry trade index, the EMBI and the forward premium. These results are in line with previous results in the literature that have proven that exchange rate premium are influenced by several financial variables, which are usually considered as 'proxies' of risk.
The Foreign Exchange Risk Premium
Title | The Foreign Exchange Risk Premium PDF eBook |
Author | |
Publisher | |
Pages | |
Release | 2001 |
Genre | |
ISBN |
Working Paper No. 06/16 - Foreign Exchange Risk Premium Determinants
Title | Working Paper No. 06/16 - Foreign Exchange Risk Premium Determinants PDF eBook |
Author | |
Publisher | |
Pages | 0 |
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Foreign Exchange Risk Premium
Title | Foreign Exchange Risk Premium PDF eBook |
Author | Mr.Lorenzo Giorgianni |
Publisher | International Monetary Fund |
Pages | 40 |
Release | 1997-04-01 |
Genre | Business & Economics |
ISBN | 1451845790 |
This paper challenges the conventional view that foreign exchange risk premiums are small, not volatile, and unrelated to macroeconomic variables. For the Italian lira (1987-94), unconditional risk premiums—constructed using survey data to measure exchange rate expectations—are found to be sizable (relative to the dimension of the forward premium), highly volatile (relative to the variability of the forward bias), and predictable. Estimation of structural models of the risk premium suggests that anticipated fiscal contractions in Italy and lower uncertainty about the future path of fiscal policy are associated with a lower risk premium on lira-denominated assets.
Determinants of Currency Risk Premiums
Title | Determinants of Currency Risk Premiums PDF eBook |
Author | John A. Carlson |
Publisher | |
Pages | 42 |
Release | 2006 |
Genre | |
ISBN |
This paper presents a theoretical model of exchange-rate determination intended to address the forward premium puzzle. It also explains the empirical observation that risk premiums depend on interest differentials. The model's closed-form solution indicates that currency risk premiums depend on two factors: interest differentials and the current deviation of the exchange rate from its long-run equilibrium. If speculators have an alternative to exchange-rate speculation, then there is no presumption that uncovered interest parity holds even approximately in long-run equilibrium. The model is consistent with existing evidence suggesting that forward premiums are negatively related to rationally expected future exchange rate changes. New empirical evidence is provided in support of the model.