Uncovering the Interest Parity: Does the UIP hold between STIBOR and other Interbank Offered Rates?
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
In this paper we examine whether the UIP holds between STIBOR and six other Interbank Offered Rates (IBORs). We use OLS regressions to see if the change in spot exchange rate can be explained by 1-month, 3-months and 6- months IBOR differential. The estimates show an inverse relationship than that predicted by the UIP theory. We find stronger statistically significant estimates when testing STIBOR against IBORs in large economies than when tested against IBORs in small economies. We also find that when testing STIBOR against IBORs in small economies the estimates tend to be more in line with the theory than when tested against IBORs in large economies.
Place, publisher, year, edition, pages
UIP, STIBOR, IBOR, OLS, Newey-West, Risk premium
IdentifiersURN: urn:nbn:se:uu:diva-226684OAI: oai:DiVA.org:uu-226684DiVA: diva2:726874
Bask, Mikael, Universitetslektor
Ohlsson, Henry, Professor