The Term Structure of Currency Futures' Risk Premia

Artikel

The use of futures instead of forwards exchange contracts completes the ma-turity spectrum of the correlation between spot yields and the premium. Wefind that the forward premium puzzle appears to be a precrisis phenomenonand is only observed for maturities longer than about 1 month. Differencesin the exposure to risk help to explain cross-sectional spreads in currency ex-cess returns. However, this only applies for medium and longer maturities.Considering that most studies that test the validity of a risk-based approachto currency excess returns focus on short maturity securities, this explainswhy this approach is so often rejected.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Journal of Money, Credit and Banking ; ISSN: 1538-4616 ; Volume: 54 ; Year: 2022 ; Issue: 1 ; Pages: 5-38 ; Hoboken: Wiley

Classification and Topics

• Classification: Wirtschaft ; Foreign Exchange ; International Finance Forecasting and Simulation: Models and Applications ; Asset Pricing; Trading Volume; Bond Interest Rates ; Contingent Pricing; Futures Pricing; option pricing ; International Financial Markets
• Subject: forward premium puzzle ; uncovered interest parity ; futures rates ; price of risk ; currency excess returns ; capital asset pricing mode

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bernoth, Kerstin ; von Hagen, Jürgen ; de Vries, Caspar
• Event: Veröffentlichung
• (who): Wiley
• (where): Hoboken
• (when): 2022

Further information

• DOI: doi:10.1111/jmcb.12872
• Handle: http://hdl.handle.net/10419/264447
• Last update: 10.03.2025, 11:43 AM CET