Menkhoff, Lukas; Sarno, Lucio; Schmeling, Maik; … - C.E.P.R. Discussion Papers - 2011
We investigate the relation between global foreign exchange (FX) volatility risk and the cross-section of excess returns arising from popular strategies that borrow in low interest rate currencies and invest in high-interest rate currencies, so-called 'carry trades'. We find that high interest...