The risk premium in the foreign exchange market─Multi-variate GARCH model analysis

• Main Authors: Tang, Run-Ru, 湯韻如
• Other Authors: Nieh, Chien-Chung
• Format: Others
• Language: zh-TW
• Published: 2000
• Online Access: http://ndltd.ncl.edu.tw/handle/28149211801646550766

碩士 === 中國文化大學 === 經濟學研究所 === 88 === The main purpose of this thesis is to investigate the volatility resources of the risk premium in the foreign exchange market. Based on Lucas (1982) two country, intertemporal asset pricing model to show risk premium equation which is the function of money supply and production. The uncertainty of money supply and production to the two country is the resources of the risk premium on a forward foreign exchange contract. Empirically, the thesis applies the theory of the generalized positive definite multi-variate GARCH model proposed by Engle and Kroner (1995) to derive bi-variate risk premium model. To utilize the conditional variance and covariance of money supply and production explain the risk premium in the foreign exchange market. This thesis deeply takes account of the component parts of money supply. More further ahead apply four-variate GARCH model, first derives four-variate risk premium model. To utilize conditional variance and covariance of four macroeconomic variances ─ domestic credit of claims on government, domestic credit of claims on enterprises, net foreign assets and production explain the risk premium in the foreign exchange market. The empirical results find that the signs on the coefficients in bi-variate risk premium model yet are large difference from the theoretical model’s, while the signs on the coefficients in four-variate risk premium model meet the theoretical model’s on the whole. It is shows that the four-variate risk premium model proposed by this thesis can clearly insights into the overall picture of the volatility resources of the risk premium affected by the macroeconomic environment.