IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Estimation of the Time-Varying Risk Premium in the Czech Foreign Exchange Market

  • Vít Pošta
Registered author(s):

    The paper presents both the theoretical account of the issue of foreign exchange risk premium and the actual estimates of the time-varying risk premium for the cases of the Czech koruna to euro and US dollar. The risk premium is modelled within a state space framework and estimated using the Kalman filtering procedure. Some financial market fundamentals are used to estimate the risk premium, and thus not only do the estimates give insight into the foreign exchange market behaviour but also into some linkages between the various segments of the financial market as a whole.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: free of charge

    File URL:
    Download Restriction: free of charge

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by University of Economics, Prague in its journal Prague Economic Papers.

    Volume (Year): 2012 (2012)
    Issue (Month): 1 ()
    Pages: 3-17

    in new window

    Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:1:id:407:p:3-17
    Contact details of provider: Postal: nam. W. Churchilla 4, 130 67 Praha 3
    Phone: (02) 24 09 51 11
    Fax: (02) 24 22 06 57
    Web page:

    More information through EDIRC

    Order Information: Postal: Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic
    Web: Email:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Geert Bekaert, 1994. "The Time Variation of Risk and Return in Foreign Exchange Markets: A General Equilibrium Perspective," NBER Working Papers 4818, National Bureau of Economic Research, Inc.
    2. Lewis, K.K., 1994. "Puzzles in international Financial Markets," Weiss Center Working Papers 94-7, Wharton School - Weiss Center for International Financial Research.
    3. Campbell, John & Cochrane, John, 2000. "Explaining the Poor Performance of Consumption-Based Asset Pricing Models," Scholarly Articles 3163265, Harvard University Department of Economics.
    4. De Paoli, Bianca & Sondergaard, Jens, 2009. "Foreign exchange rate risk in a small open economy," Bank of England working papers 365, Bank of England.
    5. Weil, Philippe, 1989. "The equity premium puzzle and the risk-free rate puzzle," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 401-421, November.
    6. John Barkoulas & Christopher F. Baum, 1996. "Time-Varying Risk Premia in the Foreign Currency Futures Basis," Boston College Working Papers in Economics 281., Boston College Department of Economics.
    7. C. Emre Alper & Oya Pinar Ardic & Salih Fendoglu, 2007. "The Economics of Uncovered Interest Parity Condition for Emerging Markets: A Survey," Working Papers 2007/13, Bogazici University, Department of Economics.
    8. R. Mehra & E. Prescott, 2010. "The equity premium: a puzzle," Levine's Working Paper Archive 1401, David K. Levine.
    9. Charles Engel, 1990. "On the foreign exchange risk premium in a general equilibrium model," Research Working Paper 90-06, Federal Reserve Bank of Kansas City.
    10. Smith, Peter & Wickens, Michael, 2002. " Asset Pricing with Observable Stochastic Discount Factors," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 397-446, July.
    11. Karen K. Lewis, 1994. "Puzzles in International Financial Markets," NBER Working Papers 4951, National Bureau of Economic Research, Inc.
    12. Fabio Canova & Takatoshi Ito, 1988. "On Time-Series Properties of Time-Varying Risk Premium in the Yen/Dollar Exchange Market," NBER Working Papers 2678, National Bureau of Economic Research, Inc.
    13. Boubakri, Salem & Guillaumin, Cyriac, 2011. "Financial integration and currency risk premium in CEECs: Evidence from the ICAPM," Emerging Markets Review, Elsevier, vol. 12(4), pages 460-484.
    14. Chen, Nai-Fu, 1991. " Financial Investment Opportunities and the Macroeconomy," Journal of Finance, American Finance Association, vol. 46(2), pages 529-54, June.
    15. Bansal, Ravi, 1997. "An Exploration of the Forward Premium Puzzle in Currency Markets," Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 369-403.
    16. Evžen Koèenda & Tigran Poghosyan, 2010. "Exchange Rate Risk in Central European Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(1), pages 22-39, February.
    17. Lewis, Karen K, 1989. "Changing Beliefs and Systematic Rational Forecast Errors with Evidence from Foreign Exchange," American Economic Review, American Economic Association, vol. 79(4), pages 621-36, September.
    18. Fama, Eugene F., 1984. "Forward and spot exchange rates," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 319-338, November.
    Full references (including those not matched with items on IDEAS)

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

    When requesting a correction, please mention this item's handle: RePEc:prg:jnlpep:v:2012:y:2012:i:1:id:407:p:3-17. See general information about how to correct material in RePEc.

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

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.