The performance of forward pricing function of foreign currency futures markets
Abstract
The present study derived a risk premium model from a joint expected utility maximization of hedgers and speculators to assess the performance of forward pricing function of foreign currency futures markets. The model is then estimated by three advanced econometric techniques: Generalized Least-Squares, Cochrane-Orcutt Autoregression, and Zellners' Seemingly Unrelated Regression to correct for heteroscedasticity, autocorrelation, and cross-error correlation, respectively. The same tests are also employed to assess the performance of forward exchange markets. The estimation results for the derived model, using both monthly and quarterly data from 1976 to 1990 for five futures and forward foreign currencies: British pound, Canadian dollar, Deutsche mark, Japanese yen, and Swiss franc, confirm that not only the forward pricing function of foreign currency futures markets has been performed well during the period examined but it also outperformed the forward exchange markets.
Subject Area
Finance
Recommended Citation
Nhan, Tai Van, "The performance of forward pricing function of foreign currency futures markets" (1992). ETD Collection for Fordham University. AAI9223827.
https://research.library.fordham.edu/dissertations/AAI9223827
