NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Foreign Currency Futures

Robert J. Hodrick, Sanjay Srivastava

NBER Working Paper No. 1743
Issued in October 1985
NBER Program(s):   ITI   IFM

The theoretical nature of risk premiums in foreign currency futures markets is derived and studied empirically. Estimation problems encountered in using futures data are discussed. Since forward rates and futures prices are demonstrated to be approximately equal, and because risk premiums in forward markets are highly variable, consistency of the data requires time variation in daily risk premiums in the futures market. Unbiasedness of daily futures prices as predictors of the following day's futures price is rejected for all currencies. Reconciliation of daily and monthly data requires positive serial correlation in daily risk premiums.

download in pdf format
   (501 K)

download in djvu format
   (331 K)

email paper

This paper is available as PDF (501 K) or DjVu (331 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1743

Published: Hodrick, Robert J. and Sanjay Srivastava. "Foreign Currency Futures," Journal of International Economics, Vol. 22, No. 1/2, Feb. 1987, pp. 1-24.

Users who downloaded this paper also downloaded these:
Jorion Risk and Turnover in the Foreign Exchange Market
Levich w18256 FX Counterparty Risk and Trading Activity in Currency Forward and Futures Markets
Darby w4801 Over-the-Counter Derivatives and Systemic Risk to the Global Financial System
Wei w6742 Currency Hedging and Goods Trade
Bilson w0474 The "Speculative Efficiency" Hypothesis
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us