Single Beta Models and currency Futures Prices

The conditional capital asset pricing model is applied to foreign currency futures prices, covariance risk being measured relative to excess returns from a broadly diversified international portfolio of equities. Positive time-varying risk premia are found in all five currencies tested when the difference between the US and the average foreign interest rates is used as an instrumental variable for the expected excess return from the common stock portfolio

Tests for a Systematic Risk Component in Deviations from Uncovered Interest Rate Parity.

In the intertemporal asset pricing model, investments in spot foreign currencies involve time-varying risk proportional to the conditional covariance of the value of the position with the intertemporal marginal rate of substitution of domestic currency. The authors detect such risk premia in deviations from uncovered interest rate parity using weekly spot currency prices and Eurocurrency interest rates. Their tests use the conditional capital asset pricing model with a world equity index as benchmark to represent aggregate wealth. Copyright 1991 by The Review of Economic Studies Limited.

Single Beta Models and currency Futures Prices

The conditional capital asset pricing model is applied to foreign currency futures prices, covariance risk being measured relative to excess returns from a broadly diversified international portfolio of equities. Positive time-varying risk premia are found in all five currencies tested when the difference between the US and the average foreign interest rates is used as an instrumental variable for the expected excess return from the common stock portfolio.