The Time-Varying Systemic Risk of Carry TradeStrategies

This paper suggests a factor model for carry trade strategies wherethe regression coeffcients are allowed to depend on market volatility and liquid-ity. Empirical results on daily data from 1995 to 2008 show that a typical carrytrade strategy has much higher exposure to the stock market and also moremean reversion in volatile periods|and that FX market volatility is a pricedrisk factor.[...]

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Year of publication:	2009-06-01
Authors:	Christiansen, Charlotte ; Ranaldo, Angelo ; Söderlind, Paul
Institutions:	Swiss National Centre of Competence in Research North South <Bern>
Subject:	Strategie \| Regressionsmodell \| Glättung \| Smoothing

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1 Introduction
2 Theoretical and Empirical Framework
2.1 Theoretical Background
2.2 Econometric Approach
3 Data Description
3.1 Currency Excess Returns
3.2 Carry Trade Excess Returns
3.3 Additional Variables
4 Empirical Results
4.1 Preliminary Results
4.2 Results from the Smooth Transition Regression Model
5 Conclusion
References

Persistent link: https://www.econbiz.de/10005868714