A Three-Variable Benchmark for Post-GFC Covered Interest Parity Deviations
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arXiv
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| Format: | Preprint |
| Veröffentlicht: |
2026
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| _version_ | 1866918520742215680 |
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| author | Shin, Useong |
| author_facet | Shin, Useong |
| contents | This paper proposes a public daily-frequency benchmark for post-GFC government-bond CIP deviations. Although CIP deviations are observed daily, the literature lacks a canonical benchmark for daily regressions comparable to standard factor models in asset pricing. Using G10 plus KRW currency-tenor panels, I show that three lagged public state variables-NFCI, the nominal broad U.S. dollar index, and the Treasury 10-year minus 2-year slope-deliver strong in-sample and leave-one-year-out performance. Cointegration, quarter-end, and aggregation-difference diagnostics suggest that the benchmark captures a persistent background component rather than short-maturity quarter-end spikes or spurious level correlation. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2605_20137 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | A Three-Variable Benchmark for Post-GFC Covered Interest Parity Deviations Shin, Useong General Finance This paper proposes a public daily-frequency benchmark for post-GFC government-bond CIP deviations. Although CIP deviations are observed daily, the literature lacks a canonical benchmark for daily regressions comparable to standard factor models in asset pricing. Using G10 plus KRW currency-tenor panels, I show that three lagged public state variables-NFCI, the nominal broad U.S. dollar index, and the Treasury 10-year minus 2-year slope-deliver strong in-sample and leave-one-year-out performance. Cointegration, quarter-end, and aggregation-difference diagnostics suggest that the benchmark captures a persistent background component rather than short-maturity quarter-end spikes or spurious level correlation. |
| title | A Three-Variable Benchmark for Post-GFC Covered Interest Parity Deviations |
| topic | General Finance |
| url | https://arxiv.org/abs/2605.20137 |