Currency risk premiums: A multi-horizon perspective

Mikhail Chernov and Magnus Dahlquist

No 18265, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is strengthened by explicitly accounting for stochastic discount factors. Information about currency risk premiums at different horizons presents a wealth of new evidence and challenges for existing models.

Keywords: Bond risk premium; Currency risk premium; Monetary policy; Nominal exchange rate; Real exchange rate (search for similar items in EconPapers)
JEL-codes: E52 F31 G12 G15 (search for similar items in EconPapers)
Date: 2023-07
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Working Paper: Currency Risk Premiums: A Multi-horizon Perspective (2023)
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