expected exchange rate depreciations (appreciations) for high (low) interest rate currencies, suggesting that disaster risk is … priced in currency markets. To study the price of disaster risk, we propose a simple structural model that includes both … Gaussian and disaster risk and can be estimated even in samples that do not contain disasters. Estimating the model over the …

We propose a new model of exchange rates, which yields a theory of the forward premium puzzle. Our explanation combines … occur and affect each country's productivity. Each country's exposure to disaster risk varies over time according to a mean …-reverting process. Risky countries command high risk premia: they feature a depreciated exchange rate and a high interest rate. As their …

Though risk aversion and the elasticity of intertemporal substitution have been the subjects of careful scrutiny when … temporal resolution of risk matters and a quantitative assessment of how much it matters should be part of the calibration … of risk into the discussion of the quantitative properties of long-run risks and related models …