Post-EMS exchange risk trends: A comparative perspective between Euro, British Pound and Japanese Yen excess returns against US Dollar
AbstractThis paper studies the exchange rate risk of Euro, Pound and Yen against US Dollar before and after the EMU. The key question is to analyse the impact of the Euro to exchange rate risks. The risk is measured by estimating risk price coefficient (RPC) from an excess return equation. A conditional heteroskedastic variance model with time-varying mean is estimated for this purpose. Recursive estimates are used to examine the evolution of the parameters and to find out time-varying risk premia. Results show that after a period of adaptation following the introduction of the Euro, the Euro/US Dollar RPC decreased.
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Bibliographic InfoPaper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 07-06.
Length: 32 pages
Date of creation: Oct 2007
Date of revision:
Exchange rate risk; GARCH-M; risk-price; times series; recursive estimation;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-19 (All new papers)
- NEP-CBA-2008-01-19 (Central Banking)
- NEP-EEC-2008-01-19 (European Economics)
- NEP-FMK-2008-01-19 (Financial Markets)
- NEP-RMG-2008-01-19 (Risk Management)
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