Publications

2022
Working Paper

Markups to Financial Intermediation in Foreign Exchange Markets

By: Jonathan Wallen

On average from 2013 to 2020, foreign asset managers in net sold forward 1.1 trillion U.S. dollars. This forward sale of dollars hedges the currency mismatch of foreign investment in U.S. dollar assets. By accommodating this demand, U.S. and European banks earn an... View Details

Keywords: Foreign Exchange; Financial Intermediation; Arbitrage; Market Power; Regulations; Currency; Assets; Interest Rates; Banking Industry

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February 1986 (Revised March 1989)
Background Note

Note on Foreign Exchange

Describes the operation of foreign exchange markets, including bid-offer spreads, cross rates, reciprocal rates, and forward rates. Provides several examples to demonstrate calculation of outright forward rates using discount and premium points quoted in the London... View Details

Keywords: Currency Exchange Rate; Capital Markets

October 2004 (Revised February 2007)
Background Note

Foreign Exchange Markets and Transactions

By: Mihir A. Desai, Christina Pham, Kathleen Luchs and Yanjun Wang

Provides information on the foreign exchange market and exchange rate movements. Describes the different types of foreign exchange transactions, including spot transactions, forwards, swaps, futures, and options. Includes worked examples to help students understand the... View Details

Keywords: Currency Exchange Rate

1992
Chapter

Exchange Rate Forecasting Techniques, Survey Data, and Implications for the Foreign Exchange Market

By: J. Frankel and K. A. Froot

Keywords: Currencies; Exchange Rates; International Macroeconomics; Monetary Policy; Currency Controls; Fixed Exchange Rates; Floating Exchange Rates; Currency Bands; Currency Zones; Currency Areas; Rational Expectations; International Finance; Currency Exchange Rate; Asset Pricing; Forecasting and Prediction; Policy

May 1990
Article

Chartists, Fundamentalists, and Trading in the Foreign Exchange Market

By: J. Frankel and K. A. Froot

Keywords: Currencies; Exchange Rates; International Macroeconomics; Monetary Policy; Currency Controls; Fixed Exchange Rates; Floating Exchange Rates; Currency Bands; Currency Zones; Currency Areas; Rational Expectations; Asset Pricing

March 2004 (Revised May 2005)
Case

Foreign Exchange Hedging Strategies at General Motors

By: Mihir A. Desai and Mark Veblen

How should a multinational firm manage foreign exchange exposures? Examines transactional, translational, and competitive exposures. Describes General Motors' corporate hedging policies, its risk management structure, and how accounting rules impact hedging decisions.... View Details

Keywords: Risk Management; Multinational Firms and Management; Currency Exchange Rate; Investment; Financial Markets; Manufacturing Industry; Auto Industry; Argentina; Japan; Canada; United States

February 1987 (Revised September 1991)
Background Note

Foreign Exchange Market, Background Note and Problem Set, The

By: W. Carl Kester and Richard P. Melnick

Discusses the background of the foreign exchange market. This includes information about the participants and how the market operates. The problem set verses students in the arithmetic in the many common foreign exchange problems such as calculating forward premium and... View Details

Keywords: Financial Markets

January 1982
Background Note

Exchange Rate Determination and Foreign Exchange Equilibrium Conditions, Study Note

By: Thomas R. Piper

Keywords: Currency Exchange Rate; International Finance

October 2005
Teaching Note

Foreign Exchange Markets and Transactions (TN)

By: Mihir A. Desai and Kathleen Luchs

Keywords: Currency Exchange Rate

October 2013
Teaching Note

Switzerland: Foreign Pressure and Direct Democracy

By: Julio J. Rotemberg

Keywords: Foreign Exchange Intervention; Exchange Rates; European Union; Exchange Rate Management; Bank Secrecy; Corporate Governance; International Relations; Corporate Accountability; Switzerland; Europe

March 2005 (Revised January 2006)
Case

Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures

By: Mihir A. Desai and Mark Veblen

How should a multinational firm manage foreign exchange exposures? Examines transactional and translational exposures and alternative responses to these exposures by analyzing two specific hedging decisions by General Motors. Describes General Motors' corporate hedging... View Details

Keywords: Multinational Firms and Management; Currency Exchange Rate; Expansion; Credit Derivatives and Swaps; Financial Management; Investment Funds; Risk and Uncertainty; International Finance; Auto Industry

November 2023
Article

A Quantity-Driven Theory of Term Premia and Exchange Rates

By: Robin Greenwood, Samuel G. Hanson, Jeremy C. Stein and Adi Sunderam

We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the... View Details

Keywords: Term Premium; Exchange Rate; Currency Exchange Rate; Bonds

October 2004
Supplement

Foreign Exchange Markets and Transactions: Solutions to Exercises

By: Mihir A. Desai, Christina Pham and Kathleen Luchs

Solutions to exercises in (9-205-016). View Details

1987
Working Paper

Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets

By: K. A. Froot

Simple regression tests that have power against the alternatives that asset prices and expected future asset returns are excessively volatile are developed and performed for the foreign exchange and stock markets. These tests have a number of advantages over... View Details

Keywords: Risk Aversion; Risk; International Investing; International Finance; Risk and Uncertainty; Asset Pricing; Financial Markets; Investment; Behavioral Finance; Volatility

September 2004 (Revised May 2005)
Supplement

Foreign Exchange Hedging Strategies at General Motors (CW)

By: Mihir A. Desai

2020
Chapter

Reserve Accumulation, Sovereign Debt, and Exchange Rate Policy

By: Laura Alfaro and Fabio Kanczuk

In the past decade, foreign participation in local-currency bond markets in emerging countries increased dramatically. Additionally, emerging countries are increasingly deviating from inflation targeting regimes, managing their exchange rate and engaging in... View Details

Keywords: Reserves; Exchange Rate; Sovereign Finance; Currency Exchange Rate; Policy

June 1982
Background Note

Note on Accounting for Foreign Exchange Translation and Conversion

March 2005 (Revised March 2006)
Case

Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures

By: Mihir A. Desai and Mark Veblen

How can a multinational firm analyze and manage currency risks that arise from competitive exposures? General Motors has a substantial competitive exposure to the Japanese yen. Although the risks GM faces from the depreciating yen are widely acknowledged, the company's... View Details

Keywords: Multinational Firms and Management; Currency Exchange Rate; Competition; Credit Derivatives and Swaps; International Finance; Financial Management; Investment Funds; Risk and Uncertainty; Auto Industry