Sorting currencies into six portfolios by their forward discounts, this paper shows that a single return-based factor -- the return on the highest minus the return on the lowest interest rate currency …
PublishedClassicThe Journal of FinanceOnline 24 May 2018Published Jun 2018
Covered interest rate parity, the no-arbitrage cornerstone of currency forward pricing, is shown to be systematically and persistently violated among G10 currencies after the 2008 crisis, in ways that …
Even the most extreme departure from complete international asset markets -- one in which investors can hold nothing abroad but the foreign risk-free bond -- fails to match the smoothness of exchange …