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The Profitability of Currency Speculation
Bilson, John F. O. - 2000
This paper presents the results of a post-sample simulation of a speculative strategy using a portfolio of foreign currency forward contracts.The main new features of the speculative strategy are (a)the use of Kalman filters to update the forecasting equation, (b) the allowance for...
Persistent link: https://www.econbiz.de/10012788637
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The Forward Exchange Market, Speculation, and Exchange Market Intervention
Eaton, Jonathan; Turnovsky, Stephen J. - 2021
This paper develops a stochastic equilibrium model of an open economy incorporating speculation in the forward exchange … market. The model is used to examine two issues. The first is the role of speculation in stabilizing the economy against … stochastic disturbances. Much risk averse speculation stabilizes domestic income against disturbances in the domestic bond market …
Persistent link: https://www.econbiz.de/10013247678
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Rational Speculation and Exchange Rates
Duarte, Margarida; Stockman, Alan C. - 2021
variables. Therefore, the model has the potential to deliver changes in exchange rates, resulting from rational speculation … like asset prices. However, it does not generate a sufficient degree of rational speculation to explain either observed …
Persistent link: https://www.econbiz.de/10013229053
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Currency Carry Trades
Berge, Travis J. - 2010
A wave of recent research has studied the predictability of foreign currency returns. A wide variety of forecasting structures have been proposed, including signals such as carry, value, momentum, and the forward curve. Some of these have been explored individually, and others have been used in...
Persistent link: https://www.econbiz.de/10013136738
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Carry Trades and Risk
Burnside, A. Craig - 2011
Carry trades, in which an investor borrows a low interest rate currency and lends a high interest rate currency, have been profitable historically. The risk exposure of carry traders might explain their high returns, but conventional models of risk do not work because traditional risk factors,...
Persistent link: https://www.econbiz.de/10013121721
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The Term Structure of Currency Carry Trade Risk Premia
Lustig, Hanno N. - 2013
Fixing the investment horizon, the returns to currency carry trades decrease as the maturity of the foreign bonds increases. The local currency term premia, which increase with the maturity, offset the currency risk premia. The time-series predictability of foreign bond returns in dollars...
Persistent link: https://www.econbiz.de/10013073193
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The Carry Trade and Fundamentals : Nothing to Fear But Feer Itself
Jorda, Oscar - 2009
The carry trade is the investment strategy of going long in high-yield target currencies and short in low-yield funding currencies. Recently, this naive trade has seen very high returns for long periods, followed by large crash losses after large depreciations of the target currencies. Based on...
Persistent link: https://www.econbiz.de/10013154539
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How Well Do Foreign Exchange Markets Function : Might a Tobin Tax Help?
Frankel, Jeffrey A. - 2008
Figures for 1995 estimate trading by dealers in the foreign exchange market at over $1,200 billion per day, most of it with other dealers. Some have linked this volume to concerns of excessive volatility in the market. Tobin's proposal to address this volatility with a small tax on all foreign...
Persistent link: https://www.econbiz.de/10012774984
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The Returns to Currency Speculation in Emerging Markets
Burnside, A. Craig - 2007
The carry trade strategy involves selling forward currencies that are at a forward premium and buying forward currencies that are at a forward discount. We compare the payoffs to the carry trade applied to two different portfolios. The first portfolio consists exclusively of developed country...
Persistent link: https://www.econbiz.de/10012777610
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Good Carry, Bad Carry
Bekaert, Geert - 2019
We distinguish between ”good” and ”bad” carry trades constructed from G-10 currencies. The good trades exhibit higher Sharpe ratios and sometimes positive return skewness, in contrast to the bad trades that have both substantially lower Sharpe ratios and highly negative return skewness....
Persistent link: https://www.econbiz.de/10012895473