조둠밈 연구실

Proposes a new method to construct model-implied exchange rates to study currency pricing in levels rather than currency returns. Our approach allows to compare currency misvaluations relative to different pricing models and decompose exchange rate variance into fundamentals, risk premia, and model-implied misvaluation. Assessing exchange rate levels for potential manipulation depends crucially on the assumed currency pricing model: the Chinese yuan is undervalued according to a naive risk-neutral model but can be rationalized by exposures to dollar, carry, and value factors.