VIX Futures Term-Structure and Currency Returns

VIX Futures Term-Structure and Currency Returns

• Autor
• mohammed mehdi kaebi
• Resumo

• I use the VIX futures term-structure to build novel currency risk factors and show that they are priced in the cross-section of currency returns and provide information for return predictability. Currencies more exposed to the level and curvature risk-factors offer a lower risk premium, acting as an insurance, while those more exposed to the slope factor offer a higher risk-premium. A portfolio that buys the high risk factor exposure currencies and shorts the low risk factor exposure currencies captures risk-return dispersion, and the excess returns of these strategies can be understood as compensation for a globally traded shock. I rationalize these results with a simple model where experts have volatility hedging demands and arbitrageurs face funding and margin costs.

• Palavras-chave
• Exchange rates, currency returns, VIX futures, international finance, asset pricing.
• Modalidade
• Comunicação oral
• Área Temática
• Apreçamento de Ativos

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