Abstract

http://ssrn.com/abstract=1935393
 
 

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The Pricing of Forward Contracts for Foreign Exchange


Robert A. Korajczyk


Northwestern University - Kellogg School of Management

June 6, 1984

Journal of Political Economy, Vol. 93, No. 2, 1985

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.

Number of Pages in PDF File: 44

Keywords: Foreign exchange, uncovered interest parity, carry trade, forward market

JEL Classification: F3, F31, G1, G12, G15

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Date posted: September 29, 2011  

Suggested Citation

Korajczyk, Robert A., The Pricing of Forward Contracts for Foreign Exchange (June 6, 1984). Journal of Political Economy, Vol. 93, No. 2, 1985. Available at SSRN: http://ssrn.com/abstract=1935393

Contact Information

Robert A. Korajczyk (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8336 (Phone)
847-491-5719 (Fax)
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