Articlegreen1985

The Pricing of Forward Contracts for Foreign Exchange

136 citations0/0 files storedJournal of Political Economy

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Abstract

This paper investigates the nature of observed deviations from the unbiased expectations hypothesis in the forward foreign exchange market. If these deviations are due to risk premia then the same premia should be observed in nominal bonds denominated in different currencies. This condition imposes testable restrictions on the parameters of a mutivariate regression model. The empirical results are consistent with a world in which time varying risk premia cause the observed deviations from unbiased expectations.

Citations in this library

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Cited by

1993Accounting for Forward Rates in Markets for Foreign Currency 1996Time-varying risk premia, volatility, and technical trading rule profits: Evidence from foreign currency futures markets 1992Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration 1987Forward Foreign Exchange Rates, Expected Spot Rates, and Premia: A Signal- Extraction Approach 1994On the Biasedness of Forward Foreign Exchange Rates: Irrationality or Risk Premia?1986A Test for Speculative Bubbles in the Sterling-Dollar Exchange Rate: 1981-84 1988Political vs. currency premia in international real interest differentials 1987Political vs. Currency Premia in International Real Interest Differentials: A Study of Forward Rates for 24 Countries

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