This paper studies foreign exchange risk premium using the uncovered interest rate parity framework in a single country context. The analysis is performed using weekly data on foreign and domestic currency deposits in Armenian banking system. The paper provides the results of the simple tests of uncovered interest parity condition, which indicate that contrary to established view dominating in ...

Principal-agent problems between corporate parent and subsidiary operations are frequently exacerbated in international settings by exchange rate fluctuations between the foreign subsidiary’s local currency and the multinational corporation’s (“MNC”) reference currency. This article develops a conceptual solution to resolve this international control conundrum using an Economic Value Added (“EV...

In this paper, we provide a re-examination of the exchange rate exposure and foreign currency derivative use by Australian resources firms in the 2006–2009 period which is characterized by increased volatility caused by the global financial crisis. In particular, we consider the interaction of a resources firm’s exchange rate risk exposures, foreign currency derivative use and the global financ...

The relation between the volatilities of pricing kernels associated with different currencies and the volatility of the exchange rate between the currencies is derived under the assumption of integrated capital markets, and the volatilities of the pricing kernels are related to the foreign exchange risk premium. Time series of pricing kernel volatilities are estimated from panel data on bond yi...

This paper shows that even adjusted for the time-varying risk premiums implied by the yield curves across countries, uncovered interest parity is still strongly rejected by the data. Moreover, factors that predict the excess bond returns are found not significant at all in predicting the foreign exchange returns. These results reject the joint restrictions on the exchange rate and interest rate...

There has been considerable growth in the derivatives holdings of Taiwanese insurance companies in recent years and this study examines the determinants of derivative use for both life and non-life companies. The determinants are different in the two insurance sectors. For the life sector, we find that large firms and firms exposed to either foreign exchange risk or interest rate risk (due to t...

Iran is one of the oil exporting countries, so the oil price plays a remarkable role in the government budget and is a major source of foreign exchange. On the other hand, the reliance of the government budget to oil income as well as its fluctuations is a fact referred to as the most important cause of inflation by many researchers. This paper explores the effect of shocks in the exchange rate...

â â â â â â â â â â â  the recent global crisis, as a big crash ( baldwin and simon , 2009), has reduced foreign demand growth affecting total countries’ exports. given the importance of foreign trade to nations and the reality that recent crisis has affected international trade we study the effects of the global financial crisis on trade relations between countries by using ma and cheng (200...

Using a State-space model, this paper investigates the contribution of both observed and unobserved fundamentals to nominal exchange rate movement in Iran for the period 1991:2-2011:4. To this end, we follow Engel and West (2005) and Balke et al. (2013) and use an asset-pricing approach to develop a rational expectations present value exchange rate model. In order to examine the role of fun...