Historically, Carry trades have been a success story for most investor and a major source of funds for emerging economies maintaining higher interest rates. Therefore it's a timely topic to investigate the risk embedded in such transactions and to what extent the carry trade returns explain the...

This study considers a pure exchange economy with insurance against ambiguous loss. Ambiguity preferences are represented by the expected utility with uncertainty (EUUP) theory advocated by Izhakian (2017). The economic premium principle of Buhlmann (1980) is generalized under EUUP. We also...