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| 2. |
- Chernov, Mikhail, et al.
(författare)
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Crash Risk in Currency Returns
- 2018
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Ingår i: Journal of Financial and Quantitative Analysis. - : Cambridge University Press (CUP): HSS Journals. - 1756-6916 .- 0022-1090. ; 53:1, s. 137-170
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Tidskriftsartikel (refereegranskat)abstract
- We develop an empirical model of bilateral exchange rates. It includes normal shocks with stochastic variance and jumps in an exchange rate and in its variance. The probability of a jump in an exchange rate corresponding to depreciation (appreciation) of the U.S. dollar is increasing in the domestic (foreign) interest rate. The probability of a jump in variance is increasing in the variance only. Jumps in exchange rates are associated with announcements; jumps in variance are not. On average, jumps account for 25% of currency risk. The dollar carry index retains these features. Options suggest that jump risk is priced.
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| 3. |
- Chernov, Mikhail, et al.
(författare)
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Currency Risk Premiums : A Multi-Horizon Perspective
- 2023
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Ingår i: Foundations and Trends in Finance. - : Now Publishers Inc.. - 1567-2409 .- 1567-2395. ; 14:1, s. 1-60
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Tidskriftsartikel (refereegranskat)abstract
- We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is strengthened by explicitly accounting for stochastic discount factors. Information about currency risk premiums at different horizons presents a wealth of new evidence and challenges for existing models.
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| 4. |
- Chernov, Mikhail, et al.
(författare)
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Currency Risk Premiums : A Multi-horizon Perspective
- 2023
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is strengthened by explicitly accounting for stochastic discount factors. Information about currency risk premiums at different horizons presents a wealth of new evidence and challenges for existing models.
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| 5. |
- Chernov, Mikhail, et al.
(författare)
-
Currency Risk Premiums: A Multi-Horizon Perspective
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is strengthened by explicitly accounting for stochastic discount factors. Information about currency risk premiums at different horizons presents a wealth of new evidence and challenges for existing models.
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| 6. |
- Chernov, Mikhail, et al.
(författare)
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Pricing Currency Risks
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- The currency market features a relatively small cross-section and conditional expected returns can be characterized by only a few signals - interest differentials, trend and mean-reversion. We exploit these properties to construct a conditional projection of the stochastic discount factor onto excess returns of individual currencies. Our approach is implementable in real time and prices all currencies and prominent strategies conditionally as well as unconditionally. We document that the fraction of unpriced risk in these assets is at least 85%. Extant explanations of carry strategies based on intermediary capital or global volatility are related to these unpriced components, while consumption growth is related to the priced component of returns.
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| 7. |
- Chernov, Mikhail, et al.
(författare)
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Pricing Currency Risks
- 2023
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Ingår i: Journal of Finance. - : Wiley. - 1540-6261 .- 0022-1082. ; 78:2, s. 693-730
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Tidskriftsartikel (refereegranskat)abstract
- The currency market features a small cross-section, and conditional expected returns can be characterized by few signals: interest differential, trend, and mean reversion. We exploit these properties to construct the ex ante mean-variance efficient portfolio of individual currencies. The portfolio is updated in real time and prices all prominent currency trading strategies, conditionally and unconditionally. The fraction of risk in these assets that does not affect their risk premiums is at least 85%. Extant explanations of carry strategies based on intermediary capital or global volatility are related to these unpriced components, while consumption growth is related to the priced component of returns.
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| 8. |
- Graveline, Jeremy, et al.
(författare)
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Crash risk in currency returns
- 2012
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- We quantify the sources of risk in currency returns as a first step toward understanding the returns to currency speculation. To do this, we develop and estimate an empirical model of exchange rate dynamics using daily data for four currencies relative to the US dollar: the Australian dollar, the British pound, the Swiss franc, and the Japanese yen. The model includes (i) normal shocks with stochastic variance, (ii) jumps up and down in the exchange rate, and (iii) jumps in the variance. We identify these components using data on exchange rates and at-the-money implied variances. We nd that the probability of an upward (downward) jump in the exchange rate, associated with depreciation (appreciation) of the US dollar, is increasing in the domestic (foreign) interest rate. The probability of jumps in variance is increasing in the variance but not related to interest rates. Many of the jumps in exchange rates are associated with macroeconomic and political news, but jumps in variance are not. On average, jumps account for 25% (and can be as high as 40%) of total currency risk over horizons of one to three months. Preliminary analysis suggests that properties of currency returns correspond to observed option smiles and that jump risk is priced.
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| 9. |
- Menkveld, Albert J., et al.
(författare)
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Nonstandard Errors
- 2024
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Ingår i: JOURNAL OF FINANCE. - : Wiley-Blackwell. - 0022-1082 .- 1540-6261. ; 79:3, s. 2339-2390
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Tidskriftsartikel (refereegranskat)abstract
- In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty-nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.
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