SSRN Author: Anthony NeubergerAnthony Neuberger SSRN Content
http://www.ssrn.com/author=59055
http://www.ssrn.com/rss/en-usSun, 15 Jan 2017 01:04:35 GMTeditor@ssrn.com (Editor)Sun, 15 Jan 2017 01:04:35 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: The Cross-Section of Currency Volatility PremiaWe identify a global risk factor that drives the cross-section of volatility excess returns in the foreign exchange market. We show that a zero-cost strategy that buys forward volatility agreements with downward sloping volatility curves and sells those with upward slopes - the volatility carry strategy - earns on average 5.15% per month. When we form slope-sorted portfolios, the covariation with volatility carry returns fully explains the cross-sectional variation of our portfolios. The lower the slope of the volatility curve, the more the forward volatility agreement is exposed to volatility carry risk. A standard no-arbitrage model of exchange rates with two types of factor - a set of country specific factors and a global one - provides intuition for the findings. The state variables determining the exposure to the global risk factor are empirically related to squared deviations of changes in economic growth. In the cross-section, the returns to volatility carry strategy are ...
http://www.ssrn.com/abstract=2892114
http://www.ssrn.com/1558135.htmlSat, 14 Jan 2017 08:45:33 GMTREVISION: The Cross-Section of Currency Volatility PremiaWe identify a global risk factor that drives the cross-section of volatility excess returns in the foreign exchange market. We show that a zero-cost strategy that buys forward volatility agreements with downward sloping volatility curves and sells those with upward slopes - the volatility carry strategy - earns on average 5.15% per month. When we form slope-sorted portfolios, the covariation with volatility carry returns fully explains the cross-sectional variation of our portfolios. The lower the slope of the volatility curve, the more the forward volatility agreement is exposed to volatility carry risk. A standard no-arbitrage model of exchange rates with two types of factor - a set of country specific factors and a global one - provides intuition for the findings. The state variables determining the exposure to the global risk factor are empirically related to squared deviations of changes in economic growth. In the cross-section, the returns to volatility carry strategy are ...
http://www.ssrn.com/abstract=2892114
http://www.ssrn.com/1557852.htmlFri, 13 Jan 2017 08:47:05 GMT