TITLE

International Capital Markets and Foreign Exchange Risk

AUTHOR(S)
Brennan, Michael J.; Yihong Xia
PUB. DATE
September 2006
SOURCE
Review of Financial Studies;Fall2006, Vol. 19 Issue 3, p753
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Relations between foreign exchange risk premia, exchange rate volatility, and the volatilities of the pricing kernels for the underlying currencies, are derived under the assumption of integrated capital markets. As predicted, the volatility of exchange rates is significantly associated with the estimated volatility of the relevant pricing kernels, and foreign exchange risk premia are significantly related to both the estimated volatility of the pricing kernels and the volatility of exchange rates. The estimated foreign exchange risk premia mostly satisfy Fama's (1984) necessary conditions for explaining the forward premium puzzle, but the puzzle remains in several cases even after taking account of the pricing kernel volatilities.
ACCESSION #
22502278

 

Related Articles

  • One-minute forex trading. Cofnas, Abe // Futures: News, Analysis & Strategies for Futures, Options & Deri;Dec2008, Vol. 37 Issue 13, p26 

    The article reports on the change of currency trading towards greater volatility as 2008 ends. It mentions that this shift will impact on foreign exchange strategies and tactics. It notes that the foreign exchange trader should respond to the changes carefully using new techniques that cope up...

  • A holistic view of corporate foreign exchange exposure management. Edens, Corey // Journal of Corporate Treasury Management;Jul2010, Vol. 3 Issue 4, p341 

    This paper attempts to define, from a corporate perspective, the potential economic impacts of foreign exchange volatility as reflected in various components of the income statement; to identify the operational challenges to quantifying FX exposures above and below the line; and to highlight the...

  • Forex misconceptions. Cofnas, Abe // Futures: News, Analysis & Strategies for Futures, Options & Deri;Nov2006, Vol. 35 Issue 14, p34 

    The article provides information about some of the misconceptions in foreign exchange trading. It is stated that the difference between an experienced trader and a novice is that the former knows what he needs to know. The challenge for traders lies in creating rules to avoid placing stops too...

  • SHARE AND SHARE ALIKE. GODFREY, STEPHEN // Financial Executive;Mar/Apr96, Vol. 12 Issue 3, p29 

    The article discusses factors to be considered when transacting firms from different countries negotiate a currency sharing agreement to manage currency risk. Parties to the arrangement must decide how gains and losses on currency fluctuations are to be shared, and whether they should cover only...

  • Market volatility? You bet. Skinner, Marie // Crops;6/5/2004, p6 

    Australian farmers are better at it than Great Britain farmers and have learnt how to do it quickly. But, when it comes to sophistication and understanding of how to do it properly, then the American farmers are the world leaders. Great Britain farmers are sort-of interested and seem to know all...

  • RISK AVERSION, DIVIDEND GROWTH AND THE FOREIGN EXCHANGE FORWARD PREMIUM. Watuwa, Richard N. // Journal of International Finance & Economics;10/20/2007, Vol. 7 Issue 1, p66 

    This paper investigates the empirical performance of dividend growth as a stochastic discount factor in an international consumption based capital asset pricing model. Given that dividend growth exhibits greater variability than consumption growth, it has potential to provide a better discount...

  • Weather Hedging: Chicago Mercantile Exchange Weather Futures Prices.  // Energy & Power Management;Oct2006, Vol. 31 Issue 10, p29 

    The article offers information about weather future prices at the Chicago Mercantile Exchange (CME) in July 2006. Hedgers using the CME weather market to manage temperature risk in July, value Sacramento, California's futures at 452 cooling degree days, while the July weather prices in Europe...

  • The Oil Effect. Michalowski, Greg // Equities;Jan2008, Vol. 56 Issue 1, p8 

    The article discusses how intra-market relationships affect the value of currency pairs in foreign exchange trading. According to the author, by being aware of the said relationships, the ability to predict currency trends will improve on a short and long-term basis. An overview of the effect of...

  • Apportioning Foreign Exchange Risk Through the Use of Third Currencies: Some Questions on Efficiency. Schwab, Bernhard; Lusztig, Peter // Financial Management (1972);Autumn78, Vol. 7 Issue 3, p25 

    The article presents information on apportioning foreign exchange risk through the use of third currencies. In a world characterized by growing uncertainties in foreign exchange markets, currency exchange risk is of obvious concern in transactions involving residents of different countries. The...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics