Time-Varying Risk Premia and the Term Structure of Forward Exchange Rates

David Peel and P F Pope

The Manchester School of Economic & Social Studies, 1995, vol. 63, issue 1, 69-81

Abstract: In a general model in which forward exchange rates include risk premia, the one would expect the sources of risk relating to forward contracts with different maturities to have common components and, therefore, to be correlated. In this paper, the authors attempt to exploit the correlation between risk premia to examine whether it is possible to rule out one of the competing explanations of forward rate inefficiency. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1995
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