scholarly journals Estimates of foreign exchange risk premia: a pricing kernel approach

2007 ◽  
Vol 35 (3) ◽  
pp. 475-495 ◽  
Author(s):  
Lorenzo Cappiello ◽  
Nikolaos Panigirtzoglou
Keyword(s):  
Foreign Exchange ◽  
Risk Premia ◽  
Pricing Kernel ◽  
Foreign Exchange Risk ◽  
Exchange Risk ◽  
Kernel Approach

scholarly journals Exchange Rates and Liquidity Risk

2020 ◽  
Vol 11 (2) ◽  
pp. 159
Author(s):  
Martin D.D. EVANS
Keyword(s):  
Risk Factors ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Liquidity Risk ◽  
Risk Premia ◽  
Time Varying ◽  
Foreign Exchange Risk ◽  
Exchange Risk

I use Forex trading data to study how risks associated with the lack of liquidity contribute to the dynamics of 17 spot exchange rates through their time-varying contributions to risk premia. I find that liquidity risk matters. All the foreign exchange risk premia compensate investors for exposure to liquidity risk; and, for many currencies, exposure to liquidity risk appears to be more important than exposure to the traditional carry and momentum risk factors. I also find that variations in the price of liquidity risk make economically important contributions to the behavior of individual foreign currency returns: they account for approximately 34%, on average, of the variability in currency returns compared to the contribution of approximately 8% from the prices of carry and momentum risk.

Foreign exchange risk premia volatility once again

1988 ◽  
Vol 7 (1) ◽  
pp. 111-113 ◽  
Author(s):  
Alberto Giovannini ◽  
Philippe Jorion
Keyword(s):  
Foreign Exchange ◽  
Risk Premia ◽  
Foreign Exchange Risk ◽  
Exchange Risk

MACROECONOMIC SHOCKS AND THE FOREIGN EXCHANGE RISK PREMIA

2006 ◽  
Vol 10 (4) ◽  
pp. 439-466 ◽  
Author(s):  
SHIGERU IWATA ◽  
SHU WU
Keyword(s):  
Foreign Exchange ◽  
Risk Premia ◽  
Structural Vector Autoregression ◽  
Currency Risk ◽  
Foreign Exchange Risk ◽  
Macroeconomic Shocks ◽  
No Arbitrage ◽  
Exchange Risk ◽  
Exchange Rate Overshooting ◽  
Structural Vector

In this paper we empirically examine the sources of the volatility of the foreign exchange risk premia. Using a nonlinear structural Vector Autoregression (VAR) model based on no-arbitrage condition to identify various macroeconomic shocks and the foreign exchange risk premia, we find that more than 80% of the volatilities of the currency risk premia can be accounted for by the standard macroeconomic shocks that drive output and inflation. By explicitly modelling the currency risk premia in the VAR system, we also offer a potential reconciliation for the seemingly contradicting observations from the previous VAR analysis of the exchange rate “overshooting” behavior under exogenous monetary innovations.

scholarly journals Financial amplification of foreign exchange risk premia

2011 ◽  
Vol 55 (3) ◽  
pp. 354-370 ◽  
Author(s):  
Tobias Adrian ◽  
Erkko Etula ◽  
Jan J.J. Groen
Keyword(s):  
Foreign Exchange ◽  
Risk Premia ◽  
Foreign Exchange Risk ◽  
Exchange Risk

scholarly journals The Foreign Exchange Risk Premium A Disaggregate Approach

2011 ◽  
Vol 18 (1) ◽  
Author(s):  
Dionysios Chionis ◽  
Nicolaos Kyriazis
Keyword(s):  
Foreign Exchange ◽  
Risk Premium ◽  
Foreign Exchange Market ◽  
Risk Premia ◽  
Time Varying ◽  
Foreign Exchange Risk ◽  
Market Participants ◽  
Exchange Risk ◽  
Foreign Exchange Risk Premium ◽  
Japanese Yen

<p class="MsoBodyText" style="margin: 0in 0.5in 0pt;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">This paper re-examines the issue of the existence of a time-varying risk premia in the three foreign exchange markets. By using the theoretical framework developed by Domowitz and Hakkio it relates the risk premium in the foreign exchange market with the heterogeneity across the market participants. The empirical research using a disaggregate survey data base support the importance is supportive of the existence of time-varying risk premia for the British Pound, German Mark and Japanese Yen exchange rates. In particular, we demonstrate that consensus measures of the risk premium mask the existence because of the importance of heterogenous expectations.</span></span></span></p>

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