IDEAS home Printed from https://ideas.repec.org/a/now/fntfin/0500000069.html
   My bibliography  Save this article

Currency Risk Premiums: A Multi-Horizon Perspective

Author

Listed:
  • Mikhail Chernov
  • Magnus Dahlquist

Abstract

We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is strengthened by explicitly accounting for stochastic discount factors. Information about currency risk premiums at different horizons presents a wealth of new evidence and challenges for existing models.

Suggested Citation

  • Mikhail Chernov & Magnus Dahlquist, 2023. "Currency Risk Premiums: A Multi-Horizon Perspective," Foundations and Trends(R) in Finance, now publishers, vol. 14(1), pages 1-60, November.
    • Handle: RePEc:now:fntfin:0500000069
    DOI: 10.1561/0500000069
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1561/0500000069
    Download Restriction: no
    File URL: https://libkey.io/10.1561/0500000069?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dimitri Vayanos & Jean‐Luc Vila, 2021. "A Preferred‐Habitat Model of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 89(1), pages 77-112, January.
    2. Irina Zviadadze, 2017. "Term Structure of Consumption Risk Premia in the Cross Section of Currency Returns," Journal of Finance, American Finance Association, vol. 72(4), pages 1529-1566, August.
    3. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 135-158, Fall.
    4. Rosen Valchev, 2020. "Bond Convenience Yields and Exchange Rate Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(2), pages 124-166, April.
    5. Jonathan H. Wright, 2011. "Term Premia and Inflation Uncertainty: Empirical Evidence from an International Panel Dataset," American Economic Review, American Economic Association, vol. 101(4), pages 1514-1534, June.
    6. Alan M. Taylor & Mark P. Taylor, 2004. "The Purchasing Power Parity Debate," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 135-158, Fall.
    7. Dimitri Vayanos & Jean‐Luc Vila, 2023. "Corrigendum: A Preferred‐Habitat Model of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 91(3), pages 31-32, May.
    8. Ralph W. Tryon, 1979. "Testing for rational expectations in foreign exchange markets," International Finance Discussion Papers 139, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yahyaei, Hamid & Singh, Abhay & Smith, Tom, 2025. "Ex ante bond returns and time-varying monotonicity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 99(C).
    2. Kabaca, Serdar & Maas, Renske & Mavromatis, Kostas & Priftis, Romanos, 2023. "Optimal quantitative easing in a monetary union," European Economic Review, Elsevier, vol. 152(C).
    3. Abhishek Kumar & Sushanta Mallick & Madhusudan Mohanty & Fabrizio Zampolli, 2023. "Market Volatility, Monetary Policy and the Term Premium," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(1), pages 208-237, February.
    4. Tamim Bayoumi & Giovanni Dell'Ariccia & Karl F Habermeier & Tommaso Mancini Griffoli & Fabian Valencia, 2014. "Monetary Policy in the New Normal," IMF Staff Discussion Notes 14/3, International Monetary Fund.
    5. Sophocles N. Brissimis & Evangelia A. Georgiou, 2022. "The effects of Federal Reserve's quantitative easing and balance sheet normalization policies on long-term interest rates," Working Papers 299, Bank of Greece.
    6. B. De Backer & M. Deroose & Ch. Van Nieuwenhuyze, 2019. "Is a recession imminent? The signal of the yield curve," Economic Review, National Bank of Belgium, issue i, pages 69-93, June.
    7. Simon Gilchrist & David López-Salido & Egon Zakrajšek, 2015. "Monetary Policy and Real Borrowing Costs at the Zero Lower Bound," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(1), pages 77-109, January.
    8. Inaba, Kei-Ichiro, 2020. "Japan’s impactful augmentation of quantitative easing sovereign-bond purchases," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    9. De Rezende, Rafael B. & Ristiniemi, Annukka, 2023. "A shadow rate without a lower bound constraint," Journal of Banking & Finance, Elsevier, vol. 146(C).
    10. Koeda, Junko & Sekine, Atsushi, 2022. "Nelson–Siegel decay factor and term premia in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 64(C).
    11. Lassaâd Mbarek & Hardik A. Marfatia & Sonja Juko, 2018. "Time-varying Response of Treasury Yields to Monetary Policy Shocks: Evidence from the Tunisian Bond Market," Working Papers 1243, Economic Research Forum, revised 23 Oct 2018.
    12. Rajmund MIRDALA, 2015. "Decomposing Euro Area Sovereign Debt Yields into Inflation Expectations and Expected Real Interest Rates," Journal of Advanced Research in Law and Economics, ASERS Publishing, vol. 6(4), pages 714-737.
    13. Aytek Malkhozov & Philippe Mueller & Andrea Vedolin & Gyuri Venter, 2017. "International Illiquidity," International Finance Discussion Papers 1201, Board of Governors of the Federal Reserve System (U.S.).
    14. Gabriele Zinna, 2014. "Price pressures in the UK index-linked market: an empirical investigation," Temi di discussione (Economic working papers) 968, Bank of Italy, Economic Research and International Relations Area.
    15. Refet S. Gürkaynak & Jonathan H. Wright, 2012. "Macroeconomics and the Term Structure," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 331-367, June.
    16. Rafael B De Rezende & Annukka Ristiniemi, 2020. "A shadow rate without a lower bound constraint," Bank of England working papers 864, Bank of England.
    17. Giuseppe Grande & Adriana Grasso & Gabriele Zinna, 2019. "The effectiveness of the ECB’s asset purchases at the lower bound," Questioni di Economia e Finanza (Occasional Papers) 541, Bank of Italy, Economic Research and International Relations Area.
    18. Levent, Korap, 2007. "Modeling purchasing power parity using co-integration: evidence from Turkey," MPRA Paper 19584, University Library of Munich, Germany.
    19. Gürkaynak, Refet S. & Kısacıkoğlu, Burçin & Lee, Sang Seok, 2022. "Exchange rate and inflation under weak monetary policy: Turkey verifies theory," CFS Working Paper Series 679, Center for Financial Studies (CFS).
    20. Mohsen Bahmani-Oskooee & Tsangyao Chang & Kuei-Chiu Lee, 2016. "Panel asymmetric nonlinear unit root test and PPP in Africa," Applied Economics Letters, Taylor & Francis Journals, vol. 23(8), pages 554-558, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:now:fntfin:0500000069. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucy Wiseman (email available below). General contact details of provider: http://www.nowpublishers.com/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.