should not. A risk premia story might justify the high returns to the carry trades. In this paper we study the relationship … risk factors. Asset pricing theory applies to the currency market: those currencies that have larger loading on risk …, especially crash risk, offer a larger mean return in compensation. Especially, we show that crash risk as measured by quantile …

Dollar carry trade risk premiums – unlike dollar-neutral or foreign exchange carry risk premiums – are positively … the entire premium, based on these proxies for the latent risk and price of risk states in the U.S. (and its business …

world. We show that even in this market exposure to liquidity risk commands a non-trivial risk premium of up to 3.6% per … annum. In particular, systematic and currency-specific liquidity risk are not subsumed by existing risk factors and … significantly correlated. This lends support to a liquidity-based explanation of the carry trade risk premium. To illustrate this …

Dollar carry trade risk premiums - unlike dollar-neutral or foreign exchange carry risk premiums - are positively … (typically based on untestable claims) in which the variables above are proxies for the latent (quantity of) risk and price of … risk states - and the business cycle - in the U.S. explains the results in the present paper. However, I avoid making this …

I investigate the relationship between carry trades and tail risk for a panel of commodity futures contracts. Unlike … significant effect on tail risk mostly in the short term and for the front end of the futures curve. In addition, the empirical … speculators and insurance providers are subject to limited risk capacity and financing liquidity constraints …