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- Title
The Spot-Forward Exchange Rate Relation in Indian Foreign Exchange Market - An Analysis.
- Authors
Nath, Golaka C.
- Abstract
Forward exchange rate bias explanation generally falls into two categories - assumption of rational expectation resulting in a risk premium and expectation errors which is systematic. The paper tests the bias in the Indian forward exchange markets using one-month and three month forward contracts. The study finds that the three month contracts have larger prediction errors than the one-month contracts. The paper also finds that the prediction errors have information content which leads to assume the presence of risk premium. The study also finds that one-month contracts have lesser variability in risks vis-à-vis the three month contracts.
- Subjects
INDIA; FOREIGN exchange rates; RATIONAL expectations (Economic theory); RISK premiums; PREDICTION models; FORWARD contracts
- Publication
International Journal of Financial Management, 2014, Vol 4, Issue 2, p23
- ISSN
2229-5682
- Publication type
Article