Image of The Term Structure of Covered Interest Rate Parity Violations

The Term Structure of Covered Interest Rate Parity Violations

We quantify the impact of risk-based and nonrisk-based intermediary constraints (IC) on the term structure of covered interest rate parity (CIP) violations. Using a stochastic discount factor (SDF) inferred from interest rate swaps, we value currency derivatives. The wedge between model-implied and observed derivative prices reflects the impact of nonrisk-based IC because our SDF incorporates risk-based IC. There is no wedge at short horizons, while the wedge accounts for 40% of long-term CIP violations. Consistent with IC theory, the wedge correlates with the shadow cost of intermediary capital, and the SDF-implied interest rate is a weighted average of collateralized and uncollateralized interest rates.

Ketersediaan
Call NumberLocationAvailable
PSB lt.2 - Karya Akhir (Koleksi Majalah)1
Informasi Detail
Judul Seri
-
No. Panggil
-
Penerbit
USA : The American Finance Association.,
Deskripsi Fisik
ill, chart, table, grafik, 678 hal, 20 cm
Bahasa
English
ISBN/ISSN
1540-6261
Klasifikasi
NONE
Tipe Isi
-
Tipe Media
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Tipe Pembawa
-
Edisi
Volume 79, Issue 3, June 2024, Pages 2077-2114
Subjek
Asset valuation
Covered Interest Rate Parity
Intermediary Constraints
Stochastic Discount Factor
Info Detail Spesifik
The Journal of Finance
Pernyataan Tanggungjawab
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