Uncertain Times Call for Priced Measures - Economic policy uncertainty and EUR/USD exchange rate risk premium
The thesis investigates European economic policy uncertainty and its influence on the currency risk premium embedded in the EUR/USD exchange rate. We build a time-series regression model utilizing monthly data from 1999 to 2020. Currency risk premium is proxied with realized excess returns. The model uses control variables for inflation differentials, and global risk sentiment, proxied by the VIX
