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Uncovered Interest Parity and the Risk Premium


Reference:

Li, D., Ghoshray, A. and Morley, B., 2011. Uncovered Interest Parity and the Risk Premium. Working Paper. Bath, U. K.: Department of Economics, University of Bath. (Bath Economics Research Working Papers; 02/11)

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    Official URL:

    http://www.bath.ac.uk/economics/research/workingpapers.html

    Abstract

    The aim of this study is to analyze the potential risk premium inherent in the uncovered interest parity (UIP) condition. In this approach the GARCH class models, including Component GARCH are used to measure the time-varying risk premium and the results show that it is significant in most countries studied in this analysis. This suggests that risk is an important part of modeling exchange rates and needs to be considered in both empirical and theoretical models. In general, the results suggest emerging countries work better in terms of UIP and the risk premium than developed countries.

    Details

    Item Type Reports/Papers (Working Paper)
    CreatorsLi, D., Ghoshray, A. and Morley, B.
    DepartmentsFaculty of Humanities & Social Sciences > Economics
    Research CentresBath Economics Research
    RefereedNo
    StatusUnpublished
    ID Code24072

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