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Currency Risk Premiums: A Multi-horizon Perspective

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  • Mikhail Chernov
  • Magnus Dahlquist

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.

Suggested Citation

  • Mikhail Chernov & Magnus Dahlquist, 2023. "Currency Risk Premiums: A Multi-horizon Perspective," NBER Working Papers 31418, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31418
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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