Currency Risk Premiums: A Multi-Horizon Perspective
By Mikhail Chernov, UCLA and NBER, USA, and CEPR, UK, mikhail.chernov@anderson.ucla.edu | Magnus Dahlquist, Stockholm School of Economics, Sweden, and CEPR, UK, magnus.dahlquist@hhs.se
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.
Currency Risk Premiums: A Multihorizon Perspective
Currency Risk Premiums: A Multi-Horizon Perspective reviews the literature on multi-horizon currency risk premiums. It shows how the multi-horizon implications arise from the classic present-value relationship. The authors 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.
