scholarly journals Historical Exchange Rate Risk Premiums In Currency Futures Markets

2011 ◽  
Vol 1 (1) ◽  
Author(s):  
Ahmet Can Inci
Keyword(s):  
Risk Premium ◽  
Futures Markets ◽  
Extreme Case ◽  
Total Sample ◽  
Font Size ◽  
Forecast Horizon ◽  
Expectations Hypothesis ◽  
Risk Premiums ◽  
Currency Futures ◽  
Transaction Fees

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-family: Times New Roman;"><span style="font-size: 10pt; mso-bidi-font-weight: bold; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;">This paper examines the historical predictive power of future spot spread in estimating currency changes.<span style="mso-spacerun: yes;">&nbsp; </span></span><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 9.5pt;">Currency futures and spot rates over the last two decades are examined.<span style="mso-spacerun: yes;">&nbsp;&nbsp; </span>Results show that as forecast horizon of currency depreciation increases, the slope coefficients become less positive, first losing their significance, and eventually for 1-month regressions, becoming negative for the British pound, Swiss franc and Japanese yen (significantly negative for the yen) indicating risk premiums differ with forecast horizon.<span style="mso-spacerun: yes;">&nbsp; </span>On the other hand, expectations hypothesis is validated when the forecast horizon is 1 day.<span style="mso-spacerun: yes;">&nbsp; </span>These results hold for each decade separately, as well as the total sample.<span style="mso-spacerun: yes;">&nbsp; </span>Comparison of early (1980s) and recent (1990s) periods reveals expectations hypothesis is validated in the recent period.<span style="mso-spacerun: yes;">&nbsp; </span>This indicates the trend towards a more efficient market.<span style="mso-spacerun: yes;">&nbsp; </span>This should not be very surprising with the introduction of round the clock electronic trading medium and reduction of transaction fees in futures markets.<span style="mso-spacerun: yes;">&nbsp; </span>This also implies that the absolute value of the risk premium has decreased over the last two decades.<span style="mso-spacerun: yes;">&nbsp; </span>The extreme case of forward premium puzzle in one-month forecasts diminishes in the 1990s.<span style="mso-spacerun: yes;">&nbsp; </span>The results are robust to partitioning the sample period into four sub samples and separating the data based on maturity of futures contracts.</span></span><strong><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"></span></strong></p>

Evidence of Risk Premiums in Foreign Currency Futures Markets

1992 ◽  
Vol 5 (1) ◽  
pp. 65-83 ◽  
Author(s):  
Thomas H. McCurdy ◽  
Ieuan Morgan
Keyword(s):  
Futures Markets ◽  
Foreign Currency ◽  
Risk Premiums ◽  
Currency Futures

An Empirical Examination of Risk Premiums in the Indian Currency Futures Market

2017 ◽  
Vol 0 (0) ◽  
Author(s):  
Satish Kumar
Keyword(s):  
Risk Premium ◽  
Foreign Currency ◽  
Futures Market ◽  
Spot Rate ◽  
Interest Rate Parity ◽  
Empirical Examination ◽  
Risk Premiums ◽  
Forward Premium Anomaly ◽  
Currency Futures ◽  
Spot Exchange Rate

AbstractIn this paper, we examine whether risk premiums are significant in explaining the deviations from the uncovered interest rate parity (UIP) condition in an emerging Indian currency futures market. In particular, we explore the unbiasedness of futures quotes as a predictor of the future spot exchange rate to understand the forward premium anomaly condition. We report huge deviations from the UIP condition for all currencies considered and show that these deviations are explained by the risk premium. The realized risk premiums for all currencies are found to be negative and significantly different from zero, which suggests that investors are awarded for taking short positions in the foreign currency. The realized risk premiums in turn are found to be negatively related to the current spot rate returns and positively to the futures premium, conditional variance of spot rate returns, and the dividend yield.

Expectations Hypothesis and the FX Risk Premium: Getting the Measure Right

2009 ◽  
Author(s):  
Lucio Sarno ◽  
Paul Georg Schneider ◽  
Christian Wagner
Keyword(s):  
Risk Premium ◽  
Expectations Hypothesis

The Determinants of the Ex Ante Risk Premiumin Commercial Real Estate

2019 ◽  
Vol 41 (3) ◽  
pp. 411-441
Author(s):  
El i Beracha ◽  
Julia Freybote ◽  
Zhenguo Lin
Keyword(s):  
Real Estate ◽  
Risk Premium ◽  
Predictive Power ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
Stock Market Volatility ◽  
Switching Regression ◽  
Risk Premiums ◽  
Debt Capital ◽  
Ex Ante

We investigate the determinants of the ex ante risk premium in commercial real estate. Using a 20-year time series and Markov-switching regression, we find that the ex ante risk premium is affected by fundamental and non-fundamental determinants, albeit not symmetrically when risk premiums are increasing and decreasing. In particular, we find that changes in debt capital market conditions have a higher predictive power for changes in the ex ante risk premium when it is increasing, while changes in stock market volatility and commercial real estate market returns have a higher predictive power when the risk premium is on the decline. In addition, changes in commercial real estate sentiment and NAREIT returns can predict changes in the ex ante risk premium; however, the predictive power of these variables varies across property types and risk premium (risk perception) states.

Impact of regulatory announcements on systemic risk in the Indian telecom sector

2018 ◽  
Vol 13 (5) ◽  
pp. 1395-1416 ◽  
Author(s):  
Sushma Priyadarsini Yalla ◽  
Som Sekhar Bhattacharyya ◽  
Karuna Jain
Keyword(s):  
Risk Premium ◽  
Systemic Risk ◽  
Service Providers ◽  
Policy Makers ◽  
Content Type ◽  
Risk Premiums ◽  
Buffering Hypothesis ◽  
Research Findings ◽  
Telecom Sector ◽  
The Impact

Purpose Post 1991, given the advent of liberalization and economic reforms, the Indian telecom sector witnessed a remarkable growth in terms of subscriber base and reduced competitive tariff among the service providers. The purpose of this paper is to estimate the impact of regulatory announcements on systemic risk among the Indian telecom firms. Design/methodology/approach This study employed a two-step methodology to measure the impact of regulatory announcements on systemic risk. In the first step, CAPM along with the Kalman filter was used to estimate the daily β (systemic risk). In the second step, event study methodology was used to assess the impact of regulatory announcements on daily β derived from the first step. Findings The results of this study indicate that regulatory announcements did impact systemic risk among telecom firms. The study also found that regulatory announcements either increased or decreased systemic risk, depending upon the type of regulatory announcements. Further, this study estimated the market-perceived regulatory risk premiums for individual telecom firms. Research limitations/implications The regulatory risk premium was either positive or negative, depending upon the different types of regulatory announcements for the telecom sector firms. Thus, this study contributes to the theory of literature by testing the buffering hypothesis in the context of Indian telecom firms. Practical implications The study findings will be useful for investors and policy-makers to estimate the regulatory risk premium as and when there is an anticipated regulatory announcement in the Indian telecom sector. Originality/value This is one of the first research studies in exploring regulatory risk among the Indian telecom firms. The research findings indicate that regulatory risk does exist in the telecom firms of India.

Sign in / Sign up

Export Citation Format

Share Document