We examine international equity allocations at the fund level and show how different returns on the foreign and domestic proportion of portfolios determine rebalancing behavior and trigger capital flows. We document the heterogeneity of rebalancing across fund types, its greater intensity under...

I study crash risk in currency markets by means of a proxy for global skewness, which measures the aggregate asymmetry of daily changes in spot exchange rates involved in a carry-trade portfolio. I find that this factor is priced in the cross-section of individual currencies. The premium for...

Market integration and currency risk are two main factors that distinguish international investment and financing decisions. Hence, we investigate the impact of currency factor on the dynamics of market integration. We compare integration indices estimated from conditional international asset...

This paper introduces a sparse and stable optimization approach for a multi-currency asset allocation problem. We study the benefits of joint optimization of assets and currencies as opposed to the standard industry practice of managing currency risk via so-called currency overlay strategies. In...

The failure of uncovered interest rate parity to explain short-term interest rate movements is well documented. We show that short-term changes in long-term interest rates do help to explain short-term exchange rate movements. The relationship gets stronger over our sample period, as the...

We provide a model-free framework to study the global factor structure of exchange rates. To this end, we propose a new methodology to estimate international stochastic discount factors (SDFs) that jointly price cross-sections of international assets, such as stocks, bonds, and currencies, in...

We develop a general equilibrium model with intermediaries at the heart of international financial markets. Global intermediaries bargain with households and extract rents for providing access to foreign claims. The behavior of intermediaries, by tilting state prices, breaks monetary neutrality...

We provide a theoretical framework to uncover in a model-free way the relationship between international stochastic discount factors (SDFs), stochastic wedges, and financial market structures. Exchange rates are in general different from the ratio of international SDFs in incomplete markets, as...

Foreign exchange operates as a two-tiered over-the-counter (OTC) market dominatedby large, strategic dealers. Using proprietary high frequency data on quotesby the largest foreign exchange dealer banks in the dealer-to-customer (D2C) market,we find a significant heterogeneity in their behavior....