In this paper we investigate 3 important properties of global currencies: misalignments measured by the deviations from equilibrium (real effective) exchange rates, crash sensitivity captured by the copula tail dependence to the global market, and moment risk premia using a model-free method --...

We show that the profitability of currency carry trades can be understood as the compensation for exchange rate misalignment risk based on the rare disastrous model of exchange rates (Farhi and Gabaix, 2008). It explains over 97% of the cross-sectional excess returns and dominates other...

In this paper we derive the measure of position-unwinding risk of currency carry trade portfolios from the currency option pricing model. The position-unwinding likelihood indicator is in nature driven by interest rate differential and currency volatility, and highly correlated with global...

In this paper, we analyze which currencies can be regarded as safe haven currencies. Our empirical approach allows us to distinguish between a low- and high stress regime, and to control for the impact of carry trade reversals and other fundamental determinants. We therefore address the question...

In this paper, we analyze which currencies can be regarded as safe haven currencies. Our empirical approach allows us to distinguish between a low- and high stress regime, and to control for the impact of carry trade reversals and other fundamental determinants. We therefore address the question...

In this paper, we analyze which currencies can be regarded as safe haven currencies. Our empirical approach allows us to distinguish between a low- and high stress regime, and to control for the impact of carry trade reversals and other fundamental determinants. We therefore address the question...

In this paper, we analyze which currencies can be regarded as safe haven currencies. Our empirical approach allows us to distinguish between a low and high stress regime, and to control for the impact of carry trade reversals and other fundamental determinants. We therefore address the question...

The Eurozone crisis is one the most important economic event in recent years. At its peak, the effects of the crisis have put at serious risk the outcome of the euro project, exposing the inherent weaknesses and vulnerabilities of the monetary union. As the degree of economic and financial...

One of the most challenging issues that economists are dealing with is the investigation of the financial turmoil in Eurozone economies. Particularly, the issue of exposing the potential crisis transmission channels has attracted considerable interest. Aiming to contribute to this literature, we...

This study investigates exchange rate movements in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) and in the Exchange Rate Mechanism II (ERM-II). On the basis of the variant of the target zone model proposed by Bartolini and Prati (1999) and Bessec (2003), we set up a...