The returns to carry trades are controversially discussed as there seems to be no unifying risk-based explanation of currency returns and stock returns. This paper addresses carry trade returns from a risk pricing perspective and examines if these returns can be connected to persistent...

The existence of time-varying risk premia in deviations from uncovered interest parity (UIP) is investigated based on a conditional capital asset pricing model (CAPM) using data from four Asia-Pacific foreign exchange markets. A parsimonious multivariate generalized autoregressive conditional...

Economic policy drives investment, production, employment, and other macroeconomic indicators of the economy. The study examines the equity, commodity, interest rates, and currency markets, taking into consideration the US economic policy uncertainty (EPU) index. The present work determines the...

We test the robustness of the regime switching model for pegged markets introduced in S. Drapeau, T. Wang, T. Wang (2021). In particular, two disputable underlying assumptions: 1) A Black and Scholes model with low volatility for the pre-depegging regime. 2) A thin tail distribution - Poisson...

Considering the recent subprime crisis, the demand for collateralized products with less exposure to the weak credit market is increasing. Hence leading investment banks aim at drawing the popular securitization techniques away from the risky credit market by applying them to other asset...

A model describing the dynamics of a foreign exchange (FX) rate should preserve the same level of analytical tractability when the inverted FX process is considered. We show that affine stochastic volatility models satisfy such a requirement. Such a finding allows us to use affine stochastic...

In this paper, we propose a theoretical and computational framework for the detection and identification of (triangular) arbitrage opportunities among spot currency exchange rates in a foreign exchange market. We obtain sufficient conditions for excluding the triangular arbitrage opportunities...

This paper analyses the impact of the June 23, 2016 Brexit vote on the British and Australian currency and equity markets. The two markets are particularly interesting as they were both strongly impacted by the Brexit vote, have cross-listed stocks and non-overlapping trading hours. Whilst the...

I examine return seasonality in the foreign exchange market using currency futures during the period 1973-2015. All the G10 currency futures yield negative returns in January and this effect happens more often in the countries that have a tax year ending in December. In contrast, returns offered...