Modelling Foreign Exchange: Expected Exchange Rate Paths
Document ID: 2005-89 (previously 2005/004)
Published on: 1st April 2005
Author: Steven Morrison
This note discusses “real world” modelling of exchange rates as implemented in the B&H ESG. We present analytic results for the distribution of the real exchange rate, in particular the expected path of real exchange rates implied by the model. Given the lognormal nature of the model, the assumption of a flat median path for rates does not imply a flat mean path
