Risk-Adjusted Covered Interest Parity: Theory and Evidence

Wong, Alfred; Leung, David; Ng, Calvin

doi:10.2139/ssrn.2834798

Cited by 16 publications

(15 citation statements)

References 28 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…It also assumes that the investment leg must use safe assets, such as short-term government bills or central bank deposits (which offer low or negative yields). Wong, Ng, and Leung (2017) and Wong and Zhang (2017) argue that the post-GFC pricing of currency forwards and swaps can be reconciled with money-market rates that are stripped of premia from counterparty risk.…”

Section: Related Literaturementioning

confidence: 99%

The Failure of Covered Interest Parity: FX Hedging Demand and Costly Balance Sheets

et al. 2016

View full text Add to dashboard Cite

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

show abstract

Section: Related Literaturementioning

confidence: 99%

The Failure of Covered Interest Parity: FX Hedging Demand and Costly Balance Sheets

et al. 2016

View full text Add to dashboard Cite

show abstract

“…Drawing on measures of dollar funding gaps of different banking systems, they highlight the role of FX hedging demand as an important driver. 10 Iida, Kimura, and Sudo (2016) and Wong, Leung, and Ng (2016) stress the importance of counterparty risk. 11…”

Section: Introductionmentioning

confidence: 99%

Segmented Money Markets and Covered Interest Parity Arbitrage

Rime

Schrimpf

Syrstad³

2017

SSRN Journal

View full text Add to dashboard Cite

“…However, it is intriguing why a relationship that has been valid for many years has failed to remain valid in the aftermath of the global financial crisis. Empirical evidence suggests that these deviations are due to concerns regarding counterparty and credit risk in international financial markets (see, for instance, Wong et al [2017]). However, the puzzle is that deviations have persisted even after these risks have returned to normal levels.…”

Section: Introductionmentioning

confidence: 99%

A rank approach for studying cross-currency bases and the covered interest rate parity

et al. 2019

View full text Add to dashboard Cite

BANCO DE LA REPUBLICA (CENTRAL BANK OF COLOMBIA) ABSTRACT. We use the recently developed panel rank-cointegration test proposed by Pedroni et al. [2015] to check for the stability conditions of the crosscountry money market interest rate bases. Using weekly information on short-term interest rates and spot and forward exchange rates for a set of 20 European economies during 2005-2017, we show that in most cases these bases are non-stationary, implying the failure of the Covered Interest Rate Parity condition. Concretely, a mean-reverting behavior is encountered in only two cases. The first includes Greece, Italy and Portugal, while the second Belgium, France and Germany.

show abstract

Risk-Adjusted Covered Interest Parity: Theory and Evidence

Cited by 16 publications

References 28 publications

The Failure of Covered Interest Parity: FX Hedging Demand and Costly Balance Sheets

The Failure of Covered Interest Parity: FX Hedging Demand and Costly Balance Sheets

Segmented Money Markets and Covered Interest Parity Arbitrage

A rank approach for studying cross-currency bases and the covered interest rate parity

Contact Info

Product

Resources

About