Kleopatra Nikolaou - Academia.edu (original) (raw)
Uploads
Papers by Kleopatra Nikolaou
A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange marke... more A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange market using forward exchange rates. We amend the conventional testing framework to exploit the information in currency options, in an attempt to compare the test results obtained using forwards and options, and to assess the robustness of previous results reported by the literature. Applying our framework to a newly constructed data set for three major dollar exchange rates, we …nd that tests based on stationary regressions suggest that options provide biased predictions of the future spot exchange rate. Cointegration-based tests that allow for endogeneity problems arising from a potential omitted risk premium term are supportive of unbiasedness. We record strong similarities in the test results for forwards and options.
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
We investigate whether international linkages in interest rates help forecast domestic yield curv... more We investigate whether international linkages in interest rates help forecast domestic yield curves out-of-sample. We propose a novel international setting to forecast yield curves, based on dynamic factor models, the EM algorithm and the Kalman …lter. We apply this methodology on three major countries, the US, Germany and the UK. We allow information from foreign yield curves to enrich the information set of the domestic yield curve. Each domestic yield curve is summarised by three factors (level, slope and curvature). Our results show that the international model outperforms the purely domestic model in forecasting the yield-curve of countries with lagging dependency patters. Intuitively, our results reveal a dynamic dependency of the German yield curve on the US and the UK and, to a lesser extent, of the UK yield curve to the US and Germany. The US yield curve appears detached from transatlantic developments.
To follow] JEL classi…cation: F31.
Journal of Futures Markets, 2006
A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange marke... more A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange market using forward exchange rates. We amend the conventional testing framework to exploit the information in currency options, in an attempt to compare the test results obtained using forwards and options, and to assess the robustness of previous results reported by the literature. Applying our framework to a newly constructed data set for three major dollar exchange rates, we …nd that tests based on stationary regressions suggest that options provide biased predictions of the future spot exchange rate. Cointegration-based tests that allow for endogeneity problems arising from a potential omitted risk premium term are supportive of unbiasedness. We record strong similarities in the test results for forwards and options.
Journal of Banking & Finance, 2013
This publication is available on the BIS website (www.bis.org).
SSRN Electronic Journal, 2000
We quantify the effect of refinancing risk on euro area money market spreads, a major factor driv... more We quantify the effect of refinancing risk on euro area money market spreads, a major factor driving spreads during the financing crisis. With the advent of the crisis, market participants' perception of their ability to refinance over a given period of time changed radically. As a result, borrowers preferred to obtain funding for longer tenors and lenders were willing to provide funding for shorter tenors. This discrepancy resulted in a need to refinance more frequently in order to borrow ove r a given horizon, thus increasing refinancing risk. We measure refinancing risk by quantifying the sensitivity of the spread to the refinancing frequency. In order to do so we introduce a model to price EURIBOR-based money market spreads vis-à-vis the overnight index swap. We adopt a methodology akin to a factor model in which the parameters determining the spreads are the intensity of the crisis, its expected half-life, and the sensitivity of spreads to the refinancing frequency. Results suggest that refinancing risk affects the spread significantly across time, albeit in a largely varying manner. Central bank interventions have reduced the spreads as well as the effect of refinancing risk on them.
A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange marke... more A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange market using forward exchange rates. We amend the conventional testing framework to exploit the information in currency options, in an attempt to compare the test results obtained using forwards and options, and to assess the robustness of previous results reported by the literature. Applying our framework to a newly constructed data set for three major dollar exchange rates, we …nd that tests based on stationary regressions suggest that options provide biased predictions of the future spot exchange rate. Cointegration-based tests that allow for endogeneity problems arising from a potential omitted risk premium term are supportive of unbiasedness. We record strong similarities in the test results for forwards and options.
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
We investigate whether international linkages in interest rates help forecast domestic yield curv... more We investigate whether international linkages in interest rates help forecast domestic yield curves out-of-sample. We propose a novel international setting to forecast yield curves, based on dynamic factor models, the EM algorithm and the Kalman …lter. We apply this methodology on three major countries, the US, Germany and the UK. We allow information from foreign yield curves to enrich the information set of the domestic yield curve. Each domestic yield curve is summarised by three factors (level, slope and curvature). Our results show that the international model outperforms the purely domestic model in forecasting the yield-curve of countries with lagging dependency patters. Intuitively, our results reveal a dynamic dependency of the German yield curve on the US and the UK and, to a lesser extent, of the UK yield curve to the US and Germany. The US yield curve appears detached from transatlantic developments.
To follow] JEL classi…cation: F31.
Journal of Futures Markets, 2006
A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange marke... more A large empirical literature has tested the unbiasedness hypothesis in the foreign exchange market using forward exchange rates. We amend the conventional testing framework to exploit the information in currency options, in an attempt to compare the test results obtained using forwards and options, and to assess the robustness of previous results reported by the literature. Applying our framework to a newly constructed data set for three major dollar exchange rates, we …nd that tests based on stationary regressions suggest that options provide biased predictions of the future spot exchange rate. Cointegration-based tests that allow for endogeneity problems arising from a potential omitted risk premium term are supportive of unbiasedness. We record strong similarities in the test results for forwards and options.
Journal of Banking & Finance, 2013
This publication is available on the BIS website (www.bis.org).
SSRN Electronic Journal, 2000
We quantify the effect of refinancing risk on euro area money market spreads, a major factor driv... more We quantify the effect of refinancing risk on euro area money market spreads, a major factor driving spreads during the financing crisis. With the advent of the crisis, market participants' perception of their ability to refinance over a given period of time changed radically. As a result, borrowers preferred to obtain funding for longer tenors and lenders were willing to provide funding for shorter tenors. This discrepancy resulted in a need to refinance more frequently in order to borrow ove r a given horizon, thus increasing refinancing risk. We measure refinancing risk by quantifying the sensitivity of the spread to the refinancing frequency. In order to do so we introduce a model to price EURIBOR-based money market spreads vis-à-vis the overnight index swap. We adopt a methodology akin to a factor model in which the parameters determining the spreads are the intensity of the crisis, its expected half-life, and the sensitivity of spreads to the refinancing frequency. Results suggest that refinancing risk affects the spread significantly across time, albeit in a largely varying manner. Central bank interventions have reduced the spreads as well as the effect of refinancing risk on them.