The Cross-Section of Currency Volatility Premia
Della Corte, P., Kozhan, R. & Neuberger, A. 
ORCID: 0000-0002-5344-1083 (2020).
The Cross-Section of Currency Volatility Premia.
Journal of Financial Economics, 139(3),
pp. 950-970.
doi: 10.1016/j.jfineco.2020.08.010
Abstract
We identify a global risk factor in the cross-section of implied volatility returns in cur- rency markets. A zero-cost strategy that buys forward volatility agreements with down- ward sloping implied volatility curves and sells those with upward slopes – a volatility carry strategy – generates significant excess returns. The covariation with volatility carry returns fully explains the cross-sectional variation of our slope-sorted portfolios. The lower the slope, the more the forward volatility agreement is exposed to volatility carry risk.
| Publication Type: | Article |
|---|---|
| Additional Information: | © 2020 Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ |
| Publisher Keywords: | Currency Volatility Risk Premia, Forward Volatility Agreement, Foreign Exchange Volatility, Term Structure |
| Subjects: | H Social Sciences > HG Finance |
| Departments: | Bayes Business School > Finance |
| SWORD Depositor: |
Available under License Creative Commons Attribution Non-commercial No Derivatives.
Download (881kB) | Preview
Export
Downloads
Downloads per month over past year
Metadata
MetadataActions (login required)
Admin Login