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Fig.1 on the next page shows the spot and forward exchange rates between Canadian Dollar (CAD) and US Dollar (USD) during 1989JAN022021APR19. Recall the unbiased

Fig.1 on the next page shows the spot and forward exchange rates between Canadian Dollar (CAD) and US Dollar (USD) during 1989JAN022021APR19. Recall the unbiased forward rates (UFR) covered in class, where st+1 is log of spot exchange rate at time t + 1 and ftk is the corresponding log of forward rate at time t with maturity k. Explain carefully whether the behavior of the spot/forward rates in Fig.1 can be related to the UFR.

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Weekly CAD/USD (1989JAN02-2021APR19) 1.7 Weekly CAD/USD (1989JAN02-2021APR19) 1.7

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