Currency-specific pricing factors are pervasive in the international finance literature. However, portfolio and risk managements based on currency factors, instead of individual currencies, are rarely discussed. This paper fills this gap by modelling dynamic correlations and non-normality among...

Lustig et al. (2011) and Menkoff et al. (2012) have recently introduced some novel forex factors, the 'dollar risk factor'(DOL) and the 'carry trade factor'(HML) and show that these factors can price carry trade portfolios, in the cross-section. This new result is useful not just in the academic...