The Term Structure of Currency Carry Trade Risk Premia

• 成果类型: Article
• 署名作者: Lustig, Hanno; Stathopoulos, Andreas; Verdelhan, Adrien
• 署名单位: Stanford University; Massachusetts Institute of Technology (MIT)
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20180098
• 发表日期: 2019
• 页码: 4142-4177
• 关键词: long-run; exchange-rates; rare disasters; bond; heteroskedasticity; autocorrelation; explanation; inference; puzzles; models

摘要

Fixing the investment horizon, the returns to currency carry trades decrease as the maturity of the foreign bonds increases. Across developed countries, the local currency term premia, which increase with the maturity of the bonds, offset the currency risk premia. Similarly, in the time-series, the predictability of foreign bond returns in dollars declines with the bonds' maturities. Leading no-arbitrage models in international finance do not match the downward term structure of currency carry trade risk premia. We derive a simple preference-free condition that no-arbitrage models need to reproduce in the absence of carry trade risk premia on long-term bonds.