This paper studies crash risk of currencies for funding‐constrained speculators in an attempt
to shed new light on the major currency puzzles. Our starting point is the currency carry …

We study the properties of the carry trade, a currency speculation strategy in which an
investor borrows low-interest-rate currencies and lends high-interest-rate currencies. This …

We describe a novel currency investment strategy, the 'dollar carry trade,'which delivers
large excess returns, uncorrelated with the returns on well-known carry trade strategies …

Currency carry trades exploiting violations of uncovered interest rate parity in G10
currencies deliver significant excess returns with annualized Sharpe ratios equal to or …

We explain the currency carry trade (CT) performance using an asset pricing model in which
factor loadings are regime dependent rather than constant. Empirical results show that a …

Since the fall of 2008, option smiles have been clearly asymmetric: out-of-the-money
currency options point to large expected exchange rate depreciations (appreciations) for …

We show that carry trade strategies resemble FX option strategies that sell out of the money
puts on high interest rate currencies. Both strategies collect premiums to generate persistent …

Risky arbitraging based on interest rate differentials between two countries is typically
referred to as a carry trade. Up until the recent global financial crisis, these trades generated …

We examine carry trade returns formed from the G10 currencies. Performance attributes
depend on the base currency. Dynamically spread-weighting and risk-rebalancing positions …

We develop a novel method to dynamically hedge foreign exchange exposure in
international equity and bond portfolios. The method exploits the time-series predictability of …