Abstract

In this paper we study the determination of forward foreign exchange rates. An exchange rate is the price of one currency in terms of another currency, and a forward rate is a contractual exchange rate established at a point in time for a transaction that will take place at the maturity date on the contract in the future. Well-organized forward markets exist for all major currencies of the world for various maturities, with the most active contract lengths being one, three, six, and twelve months.

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Citation

Hansen, Lars, and Robert Hodrick. "Risk Averse Speculation in the Forward Foreign Exchange Market: An Econometric Analysis of Linear Models." In Exchange Rates and International Macroeconomics, 113-152. University of Chicago: University of Chicago Press, 1983.

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