The Forward Discount Puzzle: Identification of Economic Assumptions

2011 ◽  
Author(s):  
Seongman Moon ◽  
Carlos Velasco
Keyword(s):  
Forward Discount

scholarly journals Incomplete Information Processing: A Solution to the Forward Discount Puzzle

2006 ◽  
pp. 1.000-53.000 ◽  
Author(s):  
Philippe Bacchetta ◽  
◽  
Eric van Wincoop ◽  
◽  
Keyword(s):  
Information Processing ◽  
Incomplete Information ◽  
Forward Discount

The relationship between the Renminbi future spot return and the forward discount rate

2013 ◽  
Vol 32 ◽  
pp. 156-168 ◽  
Author(s):  
Yanping Zhao ◽  
Jakob de Haan ◽  
Bert Scholtens ◽  
Haizhen Yang
Keyword(s):  
Discount Rate ◽  
Forward Discount ◽  
The Relationship

scholarly journals Infrequent Portfolio Decisions: A Solution to the Forward Discount Puzzle

2010 ◽  
Vol 100 (3) ◽  
pp. 870-904 ◽  
Author(s):  
Philippe Bacchetta ◽  
Eric van Wincoop
Keyword(s):  
Interest Rate ◽  
International Finance ◽  
Foreign Currency ◽  
Welfare Gain ◽  
High Interest Rate ◽  
Portfolio Decisions ◽  
High Interest ◽  
Currency Management ◽  
Forward Discount

A major puzzle in international finance is that high interest rate currencies tend to appreciate (forward discount puzzle). Motivated by the fact that only a small fraction of foreign currency holdings is actively managed, we calibrate a two-country model in which agents make infrequent portfolio decisions. We show that the model can account for the forward discount puzzle. It can also account for several related empirical phenomena, including that of “delayed overshooting.” We also show that making infrequent portfolio decisions is optimal as the welfare gain from active currency management is smaller than the corresponding fees. (JEL F31, G11, G15)

Evidence of forward discount determinants and volatility behavior

1998 ◽  
Vol 25 (6) ◽  
pp. 538-552 ◽  
Author(s):  
Maria Sophia Aguirre ◽  
Reza Saidi
Keyword(s):  
Forward Discount

scholarly journals Random Walk Expectations and the Forward Discount Puzzle

2007 ◽  
Author(s):  
Philippe Bacchetta ◽  
Eric van Wincoop
Keyword(s):  
Random Walk ◽  
Forward Discount
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