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Rethinking Deviations From Uncovered Interest Parity: the Role of Covariance Risk and Noise

โœ Scribed by Nelson C. Mark; Yangru Wu


Book ID
108557135
Publisher
John Wiley and Sons
Year
1998
Tongue
English
Weight
561 KB
Volume
108
Category
Article
ISSN
0013-0133

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Significant deviations from covered interest parity were observed during the financial crisis of 2007-2009. This paper finds that before the failure of Lehman Brothers market-wide funding liquidity risk was the main determinant of these deviations measured by swap-implied US dollar (USD) interest ra