We assess the ability of yield curve factors to predict risk premia in short-term interest rates and exchange rates across a large sample of major advanced economies. We find that the same tick-shaped linear combination of (relative) bond yields predicts risk premia in both short-term interest...

This paper provides an empirical investigation of the time-series predictive ability of foreign exchange risk measures on the return to the carry trade, a popular investment strategy that borrows in low-interest currencies and lends in high-interest currencies. Using quantile regressions, we...

I use forward-looking information available in stock market volatility indices to predict forex returns. In particular, I find that equity variance risk premiums (VRPs) — the difference between the risk-neutral and statistical expectations of market return variation — predict forex returns...