When a country abandons a fixed, or target zone exchange regime it usually claims that the regime was "fundamentally" sound but that it was undermined by pernicious speculation. The validity of the claim is impossible to assess using only observable data-there always exists a future path of...

We quantify crash risk in currency returns. To accomplish this task, we develop and estimate an empirical model of exchange rate dynamics using daily data for four currencies relative to the US dollar: the Australian dollar, the British pound, the Swiss franc, and the Japanese yen. The model...