We identify local and global factors across international bond markets that are poorly spanned by the traditional level, slope and curvature factors but have strong forecasting power for future bond excess returns. Local and global factors are jointly significant predictors of bond returns,...

We examine time varying integration of developed (DM) and emerging (EM) market government bonds. Although we find an upward trend for most countries and maturity bands, we do observe reversals and negative trends among both DMs and EMs and for some maturities during the financial crisis. We...

We find that the degree and dynamics of sovereign bond market integration across 21 developed and 18 emerging countries is significantly heterogeneous. We show that better spanning can significantly enhance market integration through dissipating local risk premiums. Integration of the sovereign...

We study the theoretical and empirical properties of a simple measure of market illiquidity, namely the realized Amihud, which is defined as the ratio between the realized volatility and trading volume and which refines the popular price impact measure proposed by Amihud (2002). In our model,...

This paper presents the first comprehensive examination of liquidity in the global foreign exchange (FX) swap market. Our analysis employs effective measures that assess both the tightness and depth of the global market. We identify three main findings: First, FX swap liquidity is fragmented...

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...

This paper establishes a general relation between investor's ambiguity and non-Gaussianity of financial asset returns. Based on that relation and utilizing a flexible non-Gaussian returns model for the joint distribution of portfolio and currency returns, we develop an ambiguity-adjusted dynamic...

This paper addresses the question of optimal currency exposure for a risk-and-ambiguity-avers international investor. A robust mean-variance model with smooth ambiguity preferences is used to derive the optimal currency exposure. In the theoretical part, we show that the sample-efficient...

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...

Over the last decade foreign bond portfolio positions in US dollar assets have risen above the reciprocal US investor positions in foreign currencies. In periods of increased economic uncertainty, institutional investors hedge their international bond positions, which creates a net hedging...