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Encyclopedia of Finance pp 324–335Cite as

Inter temporal risk and currency risk

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Abstract

Empirical work on portfolio choice and asset pricing has shown that an investor’s current asset demand is affected by the possibility of uncertain changes in future investment opportunities. In addition, different countries have different prices for goods when there is a common numeraire in the international portfolio choice and asset pricing. In this survey, we present an intertemporal international asset pricing model (IAPM) that prices market hedging risk and exchange rate hedging risk in addition to market risk and exchange rate risk. This model allows us to explicitly separate hedging against changes in the investment opportunity set from hedging against exchange rate changes as well as separate exchange rate risk from intertemporal hedging risk.

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Author information

Authors and Affiliations

  1. National Tsing Hua University, Hsinchu, Taiwan

    Jow-Ran Chang

  2. National Taiwan University, Taipei, Taiwan

    Mao-Wei Hung

Authors
  1. Jow-Ran Chang
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  2. Mao-Wei Hung
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Editor information

Editors and Affiliations

  1. Rutgers University, New Brunswick/Piscataway, USA

    Cheng-Few Lee

  2. San Francisco State University, San Francisco, USA

    Alice C. Lee

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© 2006 Springer Science+Business Media, Inc.

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Chang, JR., Hung, MW. (2006). Inter temporal risk and currency risk. In: Lee, CF., Lee, A.C. (eds) Encyclopedia of Finance. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-26336-6_30

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  • DOI: https://doi.org/10.1007/978-0-387-26336-6_30

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-0-387-26284-0

  • Online ISBN: 978-0-387-26336-6

  • eBook Packages: Business and Economics

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