“Pricing Implications of Covariances and Spreads in Currency Markets” by Dr. Thomas A. MAURER
Thursday, 25 October 2018 | 2:30 pm - 4:00 pm
910, K.K. Leung Bldg
Finance Seminar
Speaker:
Dr. Thomas A. MAURER
Assistant Professor of Finance
Olin Business School
Washington University in St. Louis
Abstract:
We introduce a covariance and spread (i.e., exchange rate forward discount) adjusted carry factor that prices the cross-section of FX market returns, where many other single and multi-factor models fail. Both the covariance matrix of exchange rate growths and forward discounts contain important information for pricing, which is not captured by well-known factors. The conditional covariance matrix and forward discounts are time-varying and forecast future realized currency returns.
