Bernoth, Kerstin
[Verfasser:in]
;
Hagen, Jürgen von
[Sonstige Person, Familie und Körperschaft];
de Vries, Casper G.
[Sonstige Person, Familie und Körperschaft]
Estimating a Latent Risk Premium in Exchange Rate Futures
Erschienen in:DIW Berlin Discussion Paper ; No. 1733
Umfang:
1 Online-Ressource (46 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3180598
Identifikator:
Entstehung:
Hochschulschrift:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 2018 erstellt
Beschreibung:
Using exchange rates futures instead of forwards completes the maturity spectrum of the correlation between the spot return and the premium. The correlation decreases with increasing maturity, presumably due to a latent risk premium. We hypothesize that the influence of the unobserved risk factor has a contract-specific risk component. Our main contribution is to control for the omitted variable bias by using a modified version of the CCE panel estimator in combination with futures data. This renders the coefficient on the futures premium insignificantly different from one. Subsequently, the contract-specific part is related to conventional proxies of risk