Title: ECU Spot Rates, Interest Rates and Yields: Are There Arbitrage Opportunities?
Authors: Sercu, Piet # ×
Issue Date: 1991
Series Title: Managerial Finance 1991 vol:17 issue:4 pages:27-34
Abstract: Advantages often ascribed to the European currency unit (ECU) include: 1. The basket, as an invoicing vehicle, offers less exchange risk because of diversification. 2. The ECU has the advantage of being an 'open' basket. 3. ECU invoicing allows simplification of foreign exchange management and accounting systems. However, things cannot be that simple - otherwise, the ECU would have driven out other currencies to a much larger extent than is the case. The 'openness' of the ECU implies that the European Community authorities can unilaterally change the composition of investors' or borrowers' portfolios and affect the portfolio's value. The alleged simplification of foreign exchange management has nothing to do with the ECU - using only the US dollar could create a similar advantage. A general conclusion is that it is nearly impossible to test efficiency in the case of ECU short-term interest rates or bond yields. A related conclusion is that the true nature of the private ECU is somewhat of a mystery
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center International Finance, Leuven
× corresponding author
# (joint) last author

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