Advanced Search
MyIDEAS: Login

The risk premium in the foreign exchange market

Contents:

Author Info

  • Anne Sibert

Abstract

This paper presents a dynamic, optimizing model of the risk premium in the forward foreign exchange market. Agents face random endowments and money growth rates. Complete insurance markets do not exist and foreign exchange is held to hedge against risk. In some examples with log-linear preferences, the size of the risk premium in the forward market is related to the variability of output and money growth. An interesting conclusion of the model is that for plausible examples, the convexity component of the nominal risk premium (due to Siegel's paradox) may be quite large relative to the total risk premium. Copyright 1989 by Ohio State University Press.

(This abstract was borrowed from another version of this item.)

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number 87-07.

as in new window
Length:
Date of creation: 1987
Date of revision:
Handle: RePEc:fip:fedkrw:87-07

Contact details of provider:
Postal: 1 Memorial Drive, Kansas City, MO 64198-0001
Phone: (816) 881-2254
Email:
Web page: http://www.kansascityfed.org/
More information through EDIRC

Order Information:
Email:
Web: http://app.ny.frb.org/cfpicnic/frame1.cfm

Related research

Keywords: Foreign exchange ; Foreign exchange futures;

Other versions of this item:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Choudhry, Taufiq, 1999. "Re-examining forward market efficiency Evidence from fractional and Harris-Inder cointegration tests," International Review of Economics & Finance, Elsevier, vol. 8(4), pages 433-453, November.
  2. Charles Engel, 1996. "The Forward Discount Anomaly and the Risk Premium: A Survey of Recent Evidence," NBER Working Papers 5312, National Bureau of Economic Research, Inc.
  3. Lars E.O. Svensson, 1990. "The Foreign Exchange Risk Premium in a Target Zone with Devaluation Risk," NBER Working Papers 3466, National Bureau of Economic Research, Inc.
  4. Edlin, Aaron S., 2002. "Forward Discount Bias, Nalebuff's Envelope Puzzle, and the Siegel Paradox in Foreign Exchange," Berkeley Olin Program in Law & Economics, Working Paper Series qt2wc1p9pw, Berkeley Olin Program in Law & Economics.
  5. Bekaert, Geert & Hodrick, Robert J., 1993. "On biases in the measurement of foreign exchange risk premiums," Journal of International Money and Finance, Elsevier, vol. 12(2), pages 115-138, April.
  6. Sylvain Leduc, 2000. "Incomplete markets, borrowing constraints, and the foreign exchange risk premium," Working Papers 00-3, Federal Reserve Bank of Philadelphia.
  7. Sonia Pangusión Espinosa., . "Testing Uncovered Interest Rate Parity: The Spanish case," Studies on the Spanish Economy 128, FEDEA.
  8. Kam Chu, 2005. "Solution to the Siegel Paradox," Open Economies Review, Springer, vol. 16(4), pages 399-405, October.
  9. Rankin, Neil, 1998. "Nominal rigidity and monetary uncertainty in a small open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 22(5), pages 679-702, May.
  10. Bernard Dumas, 1993. "Partial- Vs. General-Equilibrium Models of the International Capital Market," NBER Working Papers 4446, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedkrw:87-07

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.