This paper examines the role of currency crash risk in explaining the persistent profitability of carry trades. Focusing on the US Dollar-Turkish Lira market, we construct three forwardlooking measures of crash risk: risk reversals, crash probabilities from option-implied distributions, and jump...

By examining the connectedness of carry trade currency with stock, foreign exchange (forex), and commodity markets, the paper investigates the extent to which shocks in capital flows driven by interest-rate differentials affect financial markets. Following the framework of Diebold and Yilmaz...

This paper examines how carry trade activity affects the transmission of monetary policy in currency markets. It analyzes a set of developed and emerging market currencies against the U.S. dollar. The U.S. dollar appreciates in response to a conventional monetary policy shock but depreciates to...