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Christoffersen, Peter F.

Interest Rate Arbitrage in Currency Baskets Forecasting Weights and Measuring Risk / Peter F Christoffersen. [electronic resource] : Peter F Christoffersen. - Washington, D.C. : International Monetary Fund, 1999. - 1 online resource (30 p.) - IMF Working Papers; Working Paper ; No. 99/16 . - IMF Working Papers; Working Paper ; No. 99/16 .

When constructing hedged interest rate arbitrage portfolios for basket currencies, two issues arise: first, how are the unknown future basket weights optimally forecasted from past exchange rate data? And, second, how is risk-in terms of the conditional variance of expected profits from the interest rate arbitrage portfolio-appropriately measured when the basket weights are time-varying? Answers to these questions are provided within a time-varying parameter modeling framework estimated through the Kalman filter. An empirical application is devoted to the experience of the Thai baht currency basket (January 1992-February 1997).

ISBN: 1451843380 : 15.00 USD

ISSN: 1018-5941

Standard No.: 10.5089/9781451843385.001 doi

Subjects--Topical Terms:
Cointegration
Currency Basket
Equation
Exchange Rate
Exchange Rates
Statistics

Subjects--Geographic Terms:
Thailand