Pricing Currency Risk: Facts and Puzzles from Currency Boards
The authors investigate the patterns and determinants of the currency risk premium in two currency boards-Argentina and Hong Kong. Despite the presumed rigidity of currency boards, currency premium is almost always positive and at times very large....
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/03/1744003/pricing-currency-risk-facts-puzzles-currency-boards http://hdl.handle.net/10986/14317 |
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okr-10986-143172021-04-23T14:03:20Z Pricing Currency Risk: Facts and Puzzles from Currency Boards Schmukler, Sergio L. Servén, Luis ARBITRAGE ARGENTINE PESO ASSETS BANK DEPOSITS BANK FOR INTERNATIONAL SETTLEMENTS BENCHMARK BONDS BORROWING COSTS BRAZILIAN REAL CANADIAN DOLLAR CAPITAL ACCOUNT CAPITAL CONTROLS CAPITAL MARKETS CENTRAL BANK COMMON CURRENCY CONVERTIBILITY COST OF CAPITAL CURRENCY CURRENCY ASSETS CURRENCY BOARD CURRENCY BOARDS CURRENCY CRISES CURRENCY PEGS CURRENCY PREMIUM CURRENCY RISK DEBT DEFAULT RISK DEVALUATION DOMESTIC INTEREST RATES ECONOMIC ACTIVITY ECONOMIC DIMENSION ECONOMIC PERFORMANCE ECONOMIC SITUATION EMERGING COUNTRIES EMERGING ECONOMIES EMERGING MARKETS EURO EUROPEAN MONETARY SYSTEM EXCHANGE OPTIONS EXCHANGE RATE EXCHANGE RATE CHANGES EXCHANGE RATE DETERMINATION EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RISK EXPENDITURES FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISES FINANCIAL DATA FINANCIAL STABILITY FINANCIAL SYSTEM FLOATING EXCHANGE RATES FORECASTS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE SETTLEMENT RISK FOREIGN EXCHANGE SWAPS FOREIGN EXCHANGE TRANSACTIONS FORWARD EXCHANGE GOVERNMENT BONDS HONG KONG DOLLARS HONG KONG MONETARY AUTHORITY ILLIQUIDITY INDONESIAN RUPIAH INDUSTRIAL ECONOMIES INFLATION INFLATION PERFORMANCE INTEREST RATE INTEREST RATES INTERNATIONAL BANKS INTERNATIONAL FINANCE JAPANESE YEN KOREAN WON LIQUIDITY LOCAL CURRENCY LONG TERM MACROECONOMICS MARKET VALUE MATURITIES MONEY MARKET OUTPUT OUTPUT GROWTH OUTPUT VOLATILITY PEGS PERUVIAN SOL PESOS POLICY MAKERS POLICY RESEARCH PRIVATE SECTOR REAL INTEREST RISK AVERSE RISK AVERSION RISK PREMIA RISK PREMIUM RUSSIAN RUBLE SCENARIOS SECURITIES SOLVENCY SPOT EXCHANGE RATES TAXATION THAI BAHT TRANSACTION COSTS TRANSACTIONS COSTS VOLATILITY CURRENCY BOARDS MARKET SEGMENTATION FINANCIAL CRISES ARBITRAGE FORWARD EXCHANGE RATES INTERNATIONAL FINANCE EXCHANGE RATE REGIMES MONEY MARKET FUNDS The authors investigate the patterns and determinants of the currency risk premium in two currency boards-Argentina and Hong Kong. Despite the presumed rigidity of currency boards, currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. Currency premia differ across markets. The forward discount typically exceeds the currency premium derived from interbank rates, particularly during times of crisis. The large magnitude of these cross-market differences can be the consequence of unexploited arbitrage opportunities, market segmentation, or other risks embedded in typical measures of currency risk. The premium and its term structure depend on domestic and global factors related to devaluation expectations and risk perceptions. 2013-07-01T19:04:34Z 2013-07-01T19:04:34Z 2002-03 http://documents.worldbank.org/curated/en/2002/03/1744003/pricing-currency-risk-facts-puzzles-currency-boards http://hdl.handle.net/10986/14317 English en_US Policy Research Working Paper;No.2815 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ARBITRAGE ARGENTINE PESO ASSETS BANK DEPOSITS BANK FOR INTERNATIONAL SETTLEMENTS BENCHMARK BONDS BORROWING COSTS BRAZILIAN REAL CANADIAN DOLLAR CAPITAL ACCOUNT CAPITAL CONTROLS CAPITAL MARKETS CENTRAL BANK COMMON CURRENCY CONVERTIBILITY COST OF CAPITAL CURRENCY CURRENCY ASSETS CURRENCY BOARD CURRENCY BOARDS CURRENCY CRISES CURRENCY PEGS CURRENCY PREMIUM CURRENCY RISK DEBT DEFAULT RISK DEVALUATION DOMESTIC INTEREST RATES ECONOMIC ACTIVITY ECONOMIC DIMENSION ECONOMIC PERFORMANCE ECONOMIC SITUATION EMERGING COUNTRIES EMERGING ECONOMIES EMERGING MARKETS EURO EUROPEAN MONETARY SYSTEM EXCHANGE OPTIONS EXCHANGE RATE EXCHANGE RATE CHANGES EXCHANGE RATE DETERMINATION EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RISK EXPENDITURES FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISES FINANCIAL DATA FINANCIAL STABILITY FINANCIAL SYSTEM FLOATING EXCHANGE RATES FORECASTS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE SETTLEMENT RISK FOREIGN EXCHANGE SWAPS FOREIGN EXCHANGE TRANSACTIONS FORWARD EXCHANGE GOVERNMENT BONDS HONG KONG DOLLARS HONG KONG MONETARY AUTHORITY ILLIQUIDITY INDONESIAN RUPIAH INDUSTRIAL ECONOMIES INFLATION INFLATION PERFORMANCE INTEREST RATE INTEREST RATES INTERNATIONAL BANKS INTERNATIONAL FINANCE JAPANESE YEN KOREAN WON LIQUIDITY LOCAL CURRENCY LONG TERM MACROECONOMICS MARKET VALUE MATURITIES MONEY MARKET OUTPUT OUTPUT GROWTH OUTPUT VOLATILITY PEGS PERUVIAN SOL PESOS POLICY MAKERS POLICY RESEARCH PRIVATE SECTOR REAL INTEREST RISK AVERSE RISK AVERSION RISK PREMIA RISK PREMIUM RUSSIAN RUBLE SCENARIOS SECURITIES SOLVENCY SPOT EXCHANGE RATES TAXATION THAI BAHT TRANSACTION COSTS TRANSACTIONS COSTS VOLATILITY CURRENCY BOARDS MARKET SEGMENTATION FINANCIAL CRISES ARBITRAGE FORWARD EXCHANGE RATES INTERNATIONAL FINANCE EXCHANGE RATE REGIMES MONEY MARKET FUNDS |
| spellingShingle |
ARBITRAGE ARGENTINE PESO ASSETS BANK DEPOSITS BANK FOR INTERNATIONAL SETTLEMENTS BENCHMARK BONDS BORROWING COSTS BRAZILIAN REAL CANADIAN DOLLAR CAPITAL ACCOUNT CAPITAL CONTROLS CAPITAL MARKETS CENTRAL BANK COMMON CURRENCY CONVERTIBILITY COST OF CAPITAL CURRENCY CURRENCY ASSETS CURRENCY BOARD CURRENCY BOARDS CURRENCY CRISES CURRENCY PEGS CURRENCY PREMIUM CURRENCY RISK DEBT DEFAULT RISK DEVALUATION DOMESTIC INTEREST RATES ECONOMIC ACTIVITY ECONOMIC DIMENSION ECONOMIC PERFORMANCE ECONOMIC SITUATION EMERGING COUNTRIES EMERGING ECONOMIES EMERGING MARKETS EURO EUROPEAN MONETARY SYSTEM EXCHANGE OPTIONS EXCHANGE RATE EXCHANGE RATE CHANGES EXCHANGE RATE DETERMINATION EXCHANGE RATE REGIME EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RISK EXPENDITURES FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISES FINANCIAL DATA FINANCIAL STABILITY FINANCIAL SYSTEM FLOATING EXCHANGE RATES FORECASTS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN EXCHANGE MARKET FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE SETTLEMENT RISK FOREIGN EXCHANGE SWAPS FOREIGN EXCHANGE TRANSACTIONS FORWARD EXCHANGE GOVERNMENT BONDS HONG KONG DOLLARS HONG KONG MONETARY AUTHORITY ILLIQUIDITY INDONESIAN RUPIAH INDUSTRIAL ECONOMIES INFLATION INFLATION PERFORMANCE INTEREST RATE INTEREST RATES INTERNATIONAL BANKS INTERNATIONAL FINANCE JAPANESE YEN KOREAN WON LIQUIDITY LOCAL CURRENCY LONG TERM MACROECONOMICS MARKET VALUE MATURITIES MONEY MARKET OUTPUT OUTPUT GROWTH OUTPUT VOLATILITY PEGS PERUVIAN SOL PESOS POLICY MAKERS POLICY RESEARCH PRIVATE SECTOR REAL INTEREST RISK AVERSE RISK AVERSION RISK PREMIA RISK PREMIUM RUSSIAN RUBLE SCENARIOS SECURITIES SOLVENCY SPOT EXCHANGE RATES TAXATION THAI BAHT TRANSACTION COSTS TRANSACTIONS COSTS VOLATILITY CURRENCY BOARDS MARKET SEGMENTATION FINANCIAL CRISES ARBITRAGE FORWARD EXCHANGE RATES INTERNATIONAL FINANCE EXCHANGE RATE REGIMES MONEY MARKET FUNDS Schmukler, Sergio L. Servén, Luis Pricing Currency Risk: Facts and Puzzles from Currency Boards |
| relation |
Policy Research Working Paper;No.2815 |
| description |
The authors investigate the patterns and
determinants of the currency risk premium in two currency
boards-Argentina and Hong Kong. Despite the presumed
rigidity of currency boards, currency premium is almost
always positive and at times very large. Its term structure
is usually upward sloping, but flattens out or even becomes
inverted at times of turbulence. Currency premia differ
across markets. The forward discount typically exceeds the
currency premium derived from interbank rates, particularly
during times of crisis. The large magnitude of these
cross-market differences can be the consequence of
unexploited arbitrage opportunities, market segmentation, or
other risks embedded in typical measures of currency risk.
The premium and its term structure depend on domestic and
global factors related to devaluation expectations and risk perceptions. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Schmukler, Sergio L. Servén, Luis |
| author_facet |
Schmukler, Sergio L. Servén, Luis |
| author_sort |
Schmukler, Sergio L. |
| title |
Pricing Currency Risk: Facts and Puzzles from Currency Boards |
| title_short |
Pricing Currency Risk: Facts and Puzzles from Currency Boards |
| title_full |
Pricing Currency Risk: Facts and Puzzles from Currency Boards |
| title_fullStr |
Pricing Currency Risk: Facts and Puzzles from Currency Boards |
| title_full_unstemmed |
Pricing Currency Risk: Facts and Puzzles from Currency Boards |
| title_sort |
pricing currency risk: facts and puzzles from currency boards |
| publisher |
World Bank, Washington, D.C. |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2002/03/1744003/pricing-currency-risk-facts-puzzles-currency-boards http://hdl.handle.net/10986/14317 |
| _version_ |
1764429812719419392 |