negative, but, during the Covid-19 pandemic, the carry trade is the main net transmitter of volatility to all markets. Our …

more often tend to appreciate rather than depreciate, as noted by Fama (1983). In this paper, we treat volatility as the … critical state variable and show that positive returns to the carry trade are overwhelmingly generated in the low-volatility … "normal" state, whereas the high-volatility state is associated with lower returns or with losses as currencies revert to the …