Forward foreign exchange rates and expected future spot rates
AbstractThis paper explores whether knowledge of the time-series properties of the premium in the pricing of forward foreign exchange can be usefully exploited in forecasting future spot exchange rates. Signal-extraction techniques, based on recursive application of the Kalman filter, are used to measure the premium. Predictions using premium models compare favourably with those obtained from the use of the forward rate as a predictor of the future spot rate. The results also provide an interesting description of the time-series properties of the premium
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Applied Financial Economics.
Volume (Year): 10 (2000)
Issue (Month): 4 ()
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Web page: http://www.tandf.co.uk/journals/routledge/09603107.html
Other versions of this item:
- Wolff, Christian C.P., 2000. "Forward foreign exchange rates and expected future spot rates," Open Access publications from Maastricht University urn:nbn:nl:ui:27-13919, Maastricht University.
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- Jongen, Ron & Verschoor, Willem F.C. & Wolff, Christian C.P., 2008.
"Foreign exchange rate expectations: survey and synthesis,"
Open Access publications from Maastricht University
urn:nbn:nl:ui:27-13932, Maastricht University.
- Ron Jongen & Willem F.C. Verschoor & Christian C.P. Wolff, 2008. "Foreign Exchange Rate Expectations: Survey And Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 22(1), pages 140-165, 02.
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