The use of futures exchange contracts instead of forwards completes the maturity spectrum of the correlation between the spot yield and the premium. We ﬁnd that the forward premium puzzle (FFP) depends signiﬁcantly on the maturity horizon of the futures contract and the choice of sampling period. The FFP appears to be a pre-crisis phenomenon and is only observed for maturities longer than about one month. When examining whether the observed excess returns of futures contracts represent a fair compensation for currency risk, we ﬁnd that non-durable consumption risk and market risk can explain excess currency returns. But only in the pre-crisis period and when the maturity of the assets is longer than about three months.
Keywords: Forward premium puzzle, uncovered interest parity, futures rates, risk premium, currency excess returns, capital asset pricing model