A functional ARMA-GARCH model for predicting the value-at-risk of the EURUSD exchange rate is introduced. The model implements the yield curve differentials between EUR and the US as exogenous factors. Functional principal component analysis allows us to use the information of basically the...

Using sovereign debt data from 47 countries, we document that the third moment (skewness) of unemployment changes has a positive and significant relation with sovereign bond returns. Thus, while investors require risk premia for exposure to macroeconomic shocks (Campbell, 1996), we find that the...