Carry Trades and Exchange Rate Volatility: A TVAR Approach

Exchange rate volatility and its effect on stock market volatility

This paper investigates empirically the effect of volatility of the exchange rate of the U.S. dollar vis-à-vis the euro on U.S. stock market volatility while controlling for a number of drivers of stock return volatility. Using a GARCH(1, 1) model and using weekly data covering the period from the week of January 1, 1999 through the week of January 25, 2010, it is found that the 9/11 terrorist ...

Modelling exchange rate volatility

Two types of statistical models are empirically applied to test the pattern of volatility in the exchange rate markets. One considers the autoregressive models and tests the random walk hypothesis. The other considers the conditional variance process and tests the hypothesis of chaotic dynamics. Empirical results mostly support the random walk hypothesis and also the existence of Lorenz-type ch...

The Impact of Monetary Regime on the Exchange Rate Pass-Through under Exchange Rate Volatility (Dynamic Panel Data Approach)

Chartism and Exchange Rate Volatility

The purpose of this paper is to implement theoretically, the observation that the relative importance of fundamental versus technical analysis in the foreign exchange market depends on the time horizon in currency trade. For shorter time horizons, more weight is placed on technical analysis, while more weight is placed on fundamental analysis for longer horizons. The theoretical framework is th...

Crash-Neutral Currency Carry Trades

Currency carry trades exploiting violations of uncovered interest rate parity in G10 currencies deliver significant excess returns with annualized Sharpe equal to or greater than those of equity market factors (19902012). Using data on out-of-the-money foreign exchange options, I compute returns to crash-hedged portfolios and demonstrate that the high returns to carry trades are not due to peso...