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El trabajo presenta algunos factores que han causado la restricción crediticia a las empresas y al consumo durante la etapa de crisis que vive aún hoy la economía española. Analiza las claves que han desembocado en esta situación como son las políticas aplicadas antes y durante la crisis por los Bancos Centrales, la distribución sectorial del crédito y el uso que del mismo han hecho los bancos comerciales en sus políticas de riesgo y liquidez. Los datos analizados vinculan la situación a dos fenómenos que tienen una clara integración en la actual situación del sistema financiero en España: el “carry trade” o uso del crédito a los bancos en la adquisición de deuda pública ha llevado al “credit crunch” con niveles de crédito muy por debajo de los existentes en cualquier otro país de la OCDE resultado del comportamiento de la banca comercial en el mecanismo de transmisión de la política monetaria., This paper presents some factors which contribute and originate the current credit restrictions to companies and consumption during the crisis phase that have affected the Spanish economy is now experiencing. It analyzes key questions that lead to the current situation as policies applied by Central Banks before and during the crisis period, sectorial distribution of the credit, and performance of credit in commercial banks in their risk and liquidity policies. The quantitative data shows a clear link between two phenomena detected and integrated in the Spanish Financial System: the “carry trade” or the use of credit by the European Central Bank to buy great amounts of Public Debt caused the “credit crunch” with levels much lower than those existing in the other countries of OECD originated in base to the commercial banks behavior in their transmission role of the monetary policy., Instituto Complutense de Estudios Internacionales, TRUE, pub

This dissertation investigates factors related to the failure of covered interest parity by focusing on seven Asian emerging economies where they have both onshore deliverable forward and offshore non-deliverable forward. It implements the deviation from covered interest parity (CID) to proxy the capital control risk as to the primary risk factor and other subsequent risk factors. Among these seven countries and three types of forward maturities, capital control has a positive effect on the carry trade return, especially the strategy using onshore deliverable forward. The results are relevant to those emerging countries as they manage their capital flow and protect currency crashes.The second part constructs an extended daily capital control index from Oct. 2010 to July 2019 and collect PBoC interventions for the same period to measure the failure of CID in China onshore and offshore markets. It finds that the level of CIDs of China FX markets is positively related to the capital control restrictions but not the government intervention. However, by applying an extended GARCH model, the volatilities of the CID are reduced by direct and indirect government interventions.In the last part, my coauthor Penghao Cheng and I implement a model to explore Chinese onshore and offshore financial markets and fill the gap of the term spread differential of money market and CIP violation of currency market spillover effects. The empirical test usesa new flexible econometric method - Bayesian local projections. This Bayesian method can sensibly reduce the impact of compounded biases over the horizons and effectively deal with model misspecifications.

This dissertation investigates factors related to the failure of covered interest parity by focusing on seven Asian emerging economies where they have both onshore deliverable forward and offshore non-deliverable forward. It implements the deviation from covered interest parity (CID) to proxy the capital control risk as to the primary risk factor and other subsequent risk factors. Among these seven countries and three types of forward maturities, capital control has a positive effect on the carry trade return, especially the strategy using onshore deliverable forward. The results are relevant to those emerging countries as they manage their capital flow and protect currency crashes.The second part constructs an extended daily capital control index from Oct. 2010 to July 2019 and collect PBoC interventions for the same period to measure the failure of CID in China onshore and offshore markets. It finds that the level of CIDs of China FX markets is positively related to the capital control restrictions but not the government intervention. However, by applying an extended GARCH model, the volatilities of the CID are reduced by direct and indirect government interventions.In the last part, my coauthor Penghao Cheng and I implement a model to explore Chinese onshore and offshore financial markets and fill the gap of the term spread differential of money market and CIP violation of currency market spillover effects. The empirical test usesa new flexible econometric method - Bayesian local projections. This Bayesian method can sensibly reduce the impact of compounded biases over the horizons and effectively deal with model misspecifications.

In this study carry trade activity in AUD, CAD, EUR and YEN vis the USD between 2014 – 2019 was analysed. The first approach employs a VECM, analyse evidence of carry trade recorded in the exchange rate pairs Futures, Forwards and Spot. Results show evidence of carry with the USD being the target currency, while the others being the funding currency. However, the AUD shows specific traits of carry trade in a reverse manner, since the AUD was yielding higher interest rates than USD. The second part of the analysis investigates evidence of hedging with the help of DCC, where the returns of the currency futures and S&P 500 are used, where S&P 500 represents the USD stock market. The results show evidence of YEN being used as a hedge vis the S&P 500, while the USD shows evidence of hedging vis the AUD and CAD. The EUR case shows evidence of neither directions

In this study carry trade activity in AUD, CAD, EUR and YEN vis the USD between 2014 – 2019 was analysed. The first approach employs a VECM, analyse evidence of carry trade recorded in the exchange rate pairs Futures, Forwards and Spot. Results show evidence of carry with the USD being the target currency, while the others being the funding currency. However, the AUD shows specific traits of carry trade in a reverse manner, since the AUD was yielding higher interest rates than USD. The second part of the analysis investigates evidence of hedging with the help of DCC, where the returns of the currency futures and S&P 500 are used, where S&P 500 represents the USD stock market. The results show evidence of YEN being used as a hedge vis the S&P 500, while the USD shows evidence of hedging vis the AUD and CAD. The EUR case shows evidence of neither directions

In this paper, I study the patterns of hedge fund herding in currency future contracts and find evidence that hedge funds herd. High-interest (low-interest) currencies have higher buy-side (sell-side) herding consistent with carry trade positions. I then propose a strategy herding measure that I use to track hedge fund herding in the carry trade strategy. I find that hedge fund carry trade strategy herding positively predicts future returns, a result that is robust to a host of other measures of activity. I find no that hedge fund herding is destabilizing, and investors can improve performance by following hedge fund herding behavior in the carry trade.

El siguiente trabajo presenta un estudio de la relación de las acciones de política monetaria efectuadas por el Banco Central de Reserva del Perú y las fluctuaciones en la rentabilidad de los portafolios de inversionistas no residentes en el Perú entre los años 2007 y 2016. El período de estudio está marcado por la crisis y los efectos en los países emergentes, como el Perú. El impacto de las acciones del Banco Central se puede ver en las variables reales y principales de la economía, pero el impacto colateral en la rentabilidad de los portafolios de inversionistas no residentes implica la replicación de estrategias especulativas y de cobertura. Palabras clave: política monetaria, especulación, crisis económica, países emergentes, estrategias de renta fija, carry trade, momentum, portafolios no residentes

El siguiente trabajo presenta un estudio de la relación de las acciones de política monetaria efectuadas por el Banco Central de Reserva del Perú y las fluctuaciones en la rentabilidad de los portafolios de inversionistas no residentes en el Perú entre los años 2007 y 2016. El período de estudio está marcado por la crisis y los efectos en los países emergentes, como el Perú. El impacto de las acciones del Banco Central se puede ver en las variables reales y principales de la economía, pero el impacto colateral en la rentabilidad de los portafolios de inversionistas no residentes implica la replicación de estrategias especulativas y de cobertura. Palabras clave: política monetaria, especulación, crisis económica, países emergentes, estrategias de renta fija, carry trade, momentum, portafolios no residentes

El siguiente trabajo presenta un estudio de la relación de las acciones de política monetaria efectuadas por el Banco Central de Reserva del Perú y las fluctuaciones en la rentabilidad de los portafolios de inversionistas no residentes en el Perú entre los años 2007 y 2016. El período de estudio está marcado por la crisis y los efectos en los países emergentes, como el Perú. El impacto de las acciones del Banco Central se puede ver en las variables reales y principales de la economía, pero el impacto colateral en la rentabilidad de los portafolios de inversionistas no residentes implica la replicación de estrategias especulativas y de cobertura. Palabras clave: política monetaria, especulación, crisis económica, países emergentes, estrategias de renta fija, carry trade, momentum, portafolios no residentes

Prior studies show that extreme interest rate dfferentials (IRDs) and high foreign exchange rate (FX) volatility have substantial explanatory power for the validity of UIP. We show that these contemporaneous drivers also have predictive power by implementing a conditional currency carry trade (CT) strategy that excludes regimes for which UIP is likely to hold. Conditioning high FX volatility only, or on both FX volatility and extreme IRDs outperforms the base-case unconditional CT strategy in virtually any of the settings analyzed. Conditioning on very large IRDs only shows mixed findings. Our strategy works best for smaller CT portfolios.

The objective of this research is to evaluate the performance and the efficiency of three common foreign exchange strategies: Carry Trade, the Momentum, the reversal and the Value strategy. The analyses take into account the transaction cost and the quotes of 52 currencies since 1983. The approach is similar to the Barroso and Santa Clara (2012), however as added value it includes a restriction on the leverage and returns of the portfolio allowing the inheritance of the position in a currency for the previous period. Although the use of the genetic algorithm is computationally more expensive than other numerical methods, it produces consistent results. The results suggest that foreign exchange strategies contain information relevant to the optimization of portfolios, in particular the Carry Trade and the Momentum. However, the performance of the portfolio in high volatility periods could be improved using other characteristics that incorporate the volatility such as the Sharp or the Sortino ratios., Resumen. El objetivo de esta investigación es evaluar el desempeño y la eficiencia de cuatro estrategias comunes de intercambio de divisas: Carry Trade, Momentum, Reversal y Value. Para los análisis se tiene en cuenta el costo de transacción y las cotizaciones de 52 monedas desde 1983. El enfoque es similar a Barroso y Santa Clara (2012), sin embargo como valor agregado se incluye una restricción en el apalancamiento y los retornos de la cartera permitiendo la herencia de la posición en una moneda de un período al siguiente. Para el cálculo de los retornos se propone el uso de un algoritmo genético que aunque es computacionalmente más caro que otros métodos numéricos produjo resultados consistentes. Los resultados sugieren que las estrategias cambiarias contienen información relevante para la optimización de portafolios en particular el Carry Trade y el Momentum aunque el modelo podría mejorarse si se consideran otras características como pueden ser la razón de Sharp o Sortino que incorporan el nivel de volatilidad para mejorar el desempeño del portafolio en episodios de volatilidad elevada.

I propose a global risk factor – Currency Traded Risk (CTR). This risk factor is the first to identify the directional link between currencies and equities. CTR captures the genesis of financial globalization, and contains the greatest predictive ability to date for monthly returns on a global stock portfolio. Theoretically, return expectation is intimately linked to time-varying risk premia. Due to the intrinsic scope of currency values in integrating the world’s financial markets, information on time-varying risk premia prices into currencies at greater speed, scale, and global consensus, relative other asset classes. High interest rate currencies proxy as a risk-on asset class. Low interest rate currencies proxy as a risk-off asset class. Innovations in these currencies’ values summarize global risk premia and forecast equity market returns. CTR measures two sources of global risk premia; the difference between averaged spot returns of high interest rate currencies and low interest rate currencies, and the difference between implied and realized volatility of high interest rate currencies. Using recursive regressions, CTR predicts monthly MSCI World Index© returns out of sample, with R2’s consistent at 10% from 2008 to 2017. Currencies track global risk premia, whereas equities respond to it.

[Resumen]: En los años 70 se pusieron en marcha una serie de medidas económicas en todo el mundo con la finalidad de desregularizar el sector financiero global. A partir de ello, se generó la estrategia especulativa del carry trade en divisas, la cual se nutre, en determinadas modalidades, del sistema financiero conocido como shadow banking. Introducimos ambos conceptos con la intención de contextualizar la investigación de la viabilidad de varias carteras de carry, con las divisas BRL, MXN y COP frente al USD, con el objetivo de minimizar varios indicadores de riesgo. Se concluye que existen, en general, beneficios de diversificación con respecto a las estrategias COP y MXN, pero nunca con respecto a BRL, estrategia que presenta unos rendimientos y una ratio de Sharpe insuperables., [Abstract]: In the 1970’s, a series of economic measures were implemented throughout the world, in order to achieve the deregulation of the global financial sector. And as a result, a new speculative strategy known as currency carry trade was generated, fueled, in certain modalities, by the financial system known as shadow banking. Both concepts are introduced in this academic study, with the intention of contextualizing the research of the viability of several carry portfolios, using currencies such as BRL, MXN and COP against the US Dollar, with the aim of minimizing several risk indicators. The conclusion reached here is that diversification is beneficial with respect to the COP and MXN strategies, but never with respect to BRL, a strategy that presents both excellent performance and Sharpe Ratio that are unrivalled.

Recent work suggests non-financial firms have acted like financial intermediaries particularly in emerging economies. This paper corroborates these findings but then asks "why?" The results indicate evidence for carry-trade activities, but they are focused on countries with higher levels of capital controls, particular controls on inflows. There is little evidence for such activities given other potential motives. It is posited that this phenomenon is due more to the reaction of countries in the face of low global interest rates, quantitative easing and strong capital inflows than incomplete markets or the retreat of global banks due to impaired balance sheets or tighter regulations.

[Resumen] Esta tesis doctoral cubre el análisis de las economías del carry trade. El carry trade es una estrategia especulativa ampliamente establecida en los mercados financieros. Analizamos el carry trade en divisas y su relación con la banca en la sombra (shadow banking), la intermediación crediticia de mercado con implicaciones potenciales de riesgo sistémico. Primero exploramos el peso del shadow banking en los mercados de divisas. Además desarrollamos estrategias especulativas holísticas basadas en las interacciones entre shadow banking y carry trade en un grupo seleccionado de divisas latinoamericanas. Exploramos dos grupos de estrategias desarrolladas por los profesionales en el mercado, estrategias de seguimiento de tendencia y estrategias de asignación de activos basadas en riesgo. Debido al papel clave que los especuladores dan a la ratio de Sharpe en la selección de estrategias potenciales, también proponemos una deducción formal de la carry to risk ratio a partir de la definición de la ratio de Sharpe ex ante. La carry to risk ratio es una medida habitual del atractivo del carry especulativo. Expandimos el potencial de la medida de carry to risk desarrollando dos versiones ampliadas de la ratio. Esto lo hacemos con objeto de afrontar la complejidad de las estrategias especulativas desplegadas por los profesionales. Además, desarrollamos un ciclo de carry trade de divisas, adaptando la aproximación de Kindelberger-Minsky para los ciclos de burbuja y crash., [Resumo] Esta tese doutoral cobre a análise das economías do carry trade. O carry trade é unha estratexia especulativa amplamente establecida nos mercados financeiros. Analizamos o carry trade en divisas e a súa relación coa banca na sombra (shadow banking), a intermediación crediticia de mercado con implicacións potenciais de risco sistémico. Primeiro exploramos o peso do shadow banking nos mercados de divisas. Ademais desenvolvemos estratexias especulativas holísticas baseadas nas interaccións entre shadow banking e carry trade nun grupo seleccionado de divisas latinoamericanas. Exploramos dous grupos de estratexias desenvolvidas polos profesionais no mercado, estratexias de seguimento de tendencia e estratexias de asignación de activos baseadas en risco. Debido ao papel clave que os especuladores dan á cociente de Sharpe na selección de estratexias potenciais, tamén propoñemos unha dedución formal da cociente carry to risk a partir da definición da cociente de Sharpe ex ante. A carry to risk é unha medida habitual do atractivo do carry especulativo. Expandimos o potencial da medida de carry to risk desenvolvendo dúas versións ampliadas da cociente. Isto facémolo con obxecto de afrontar a complexidade das estratexias especulativas despregadas polos profesionais. Ademais, desenvolvemos un ciclo de carry trade de divisas, adaptando a aproximación de Kindelberger-Minsky para os ciclos de burbulla e crash., [Abstract] This doctoral thesis covers the analysis of the economies of carry trade. The carry trade is a widely established speculative strategy in financial markets. We analyze the currency carry trade and its relationship with shadow banking, market credit intermediation with potential systemic risk implications. We first explore the weight of the shadow banking in currency markets. We also develop holistic speculative strategies based in the interactions between shadow banking and carry trade in a selected group of Latin American currencies. We explore two groups of strategies developed by practitioners, trend following strategies and active risk allocation strategies. Due to the key role of the Sharpe ratio in the selection of the potential strategies by the speculators, we also propose a formal deduction of the carry to risk ratio starting from the definition of the ex-ante Sharpe ratio. The carry to risk ratio is a common measure of speculative carry attractiveness. We expand the potential of the carry to risk measure developing two enhanced variations of the ratio. We do this to cope with the complexity of the speculation techniques deployed by practitioners. In addition, we develop a currency carry trade cycle, adapting the Kindelberger-Minsky approach of bubble and burst cycles.

The Sharpe Ratio offers an excellent summary of the excess return required per unit of risk invested. This work presents an adaptation of the ex-ante Sharpe Ratio for currencies where we consider a random walk approach for the currency behavior and implied volatility as a proxy for market expectations of future realized volatility. The outcome of the proposed measure seems to gauge some information on the expected required return attached to the “peso problem”.

The Sharpe Ratio offers an excellent summary of the excess return required per unit of risk invested. This work presents an adaptation of the ex-ante Sharpe Ratio for currencies where we consider a random walk approach for the currency behavior and implied volatility as a proxy for market expectations of future realized volatility. The outcome of the proposed measure seems to gauge some information on the expected required return attached to the “peso problem”.

The Sharpe Ratio offers an excellent summary of the excess return required per unit of risk invested. This work presents an adaptation of the ex-ante Sharpe Ratio for currencies where we consider a random walk approach for the currency behavior and implied volatility as a proxy for market expectations of future realized volatility. The outcome of the proposed measure seems to gauge some information on the expected required return attached to the “peso problem”.

This paper presents some factors which contribute and originate the current credit restrictions to companies and consumption during the crisis phase that have affected the Spanish economy is now experiencing. It analyzes key questions that lead to the current situation as policies applied by Central Banks before and during the crisis period, sectorial distribution of the credit, and performance of credit in commercial banks in their risk and liquidity policies. The quantitative data shows a clear link between two phenomena detected and integrated in the Spanish Financial System: the “carry trade” or the use of credit by the European Central Bank to buy great amounts of Public Debt caused the “credit crunch” with levels much lower than those existing in the other countries of OECD originated in base to the commercial banks behavior in their transmission role of the monetary policy., El trabajo presenta algunos factores que han causado la restricción crediticia a las empresas y al consumo durante la etapa de crisis que vive aún hoy la economía española. Analiza las claves que han desembocado en esta situación como son las políticas aplicadas antes y durante la crisis por los Bancos Centrales, la distribución sectorial del crédito y el uso que del mismo han hecho los bancos comerciales en sus políticas de riesgo y liquidez. Los datos analizados vinculan la situación a dos fenómenos que tienen una clara integración en la actual situación del sistema financiero en España: el “carry trade” o uso del crédito a los bancos en la adquisición de deuda pública ha llevado al “credit crunch” con niveles de crédito muy por debajo de los existentes en cualquier otro país de la OCDE resultado del comportamiento de la banca comercial en el mecanismo de transmisión de la política monetaria.

The downside risk CAPM (DR-CAPM) can price the cross section of currency returns. The market-beta differential between high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also high, than it is conditional on good market returns. Correctly accounting for this variation is crucial for the empirical performance of the model. The DR-CAPM can jointly explainthe cross section of equity, commodity, sovereign bond and currency returns, thus offering a unified risk view of these asset classes. In contrast, popular models that have been developed for a specic asset class fail to jointly price other asset classes.

This paper presents a consumption-based general equilibrium model for valuing foreign exchange contingent claims. The model identifies a novel economic mechanism by exploiting highly but imperfectly shared consumption disaster with variable intensities which are the concerns to the representative investor under recursive utility. When applied to the data, the model simultaneously replicates (i) the moderate option-implied volatilities; (ii) substantial variations in the risk-neutral skewness of currency returns; (iii) the uncovered interest rate parity puzzle; and (iv) the first two moments of carry trade returns. Furthermore, the model rationalizes salient features of the aggregate stock, government bonds, and equity index options.

This paper presents a consumption-based general equilibrium model for valuing foreign exchange contingent claims. The model identifies a novel economic mechanism by exploiting highly but imperfectly shared consumption disaster with variable intensities which are the concerns to the representative investor under recursive utility. When applied to the data, the model simultaneously replicates (i) the moderate option-implied volatilities; (ii) substantial variations in the risk-neutral skewness of currency returns; (iii) the uncovered interest rate parity puzzle; and (iv) the first two moments of carry trade returns. Furthermore, the model rationalizes salient features of the aggregate stock, government bonds, and equity index options.

One of the most popular investment and trading strategies over the last decade, has been the currency carry trade, which allows traders and investors to buy high-yielding currencies in the Foreign Exchange spot market by borrowing, low or zero interest rate currencies in the form of pairs, such as the Australian Dollar/Japanese Yen (AUD/JPY), with the purpose of investing the proceeds afterwards into fixed-income securities.To be able to determine the causality between the returns of equity markets and the foreign exchange market, we choose to observe the sensitivity and influence of two equity indexes on several pairs involved in carry trading. The reason for studying these relationships is to further explain the causes of the uncovered interest parity puzzle, thus adding our contribution to the academic field through this thesis.To accomplish our goals, data was gathered for daily quotes of 16 different currency pairs, grouped by interest differentials, and two equity indexes, the S&P 500 and FTSE All-World, along with data for the VIX volatility index, for the 2003-2012 period. The data was collected from Thomson Reuters Datastream and the selected ten year span was divided into three different periods. This was done in order to discover the differences on how equity indexes relate to typical carry trade currency pairs, depending on market developments before, during and after the world financial crisis.The tests conducted on the collected data measured the correlations, influences and sensitivity for the 16 different currency pairs with the S&P 500 Index, the FTSE All-World index, and the volatility index between the years of 2003-2012. For influences and sensitivity, we performed Maximum Likelihood (ML) regressions with Generalized Autoregressive Conditional Heteroscedasticity (GARCH) [1,1], in Eviews software.After analyzing the results, we found that, during our chosen time period, the majority of currency pair daily returns are positively correlated

The downside risk CAPM (DR-CAPM) can price the cross section of currency returns. The market-beta differential between high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also high, than it is conditional on good market returns. Correctly accounting for this variation is crucial for the empirical performance of the model. The DR-CAPM can jointly explainthe cross section of equity, commodity, sovereign bond and currency returns, thus offering a unified risk view of these asset classes. In contrast, popular models that have been developed for a specic asset class fail to jointly price other asset classes.

In this paper, we measure currency carry trade funding risk using stock market volatility and crash risk in Japan, the main funding currency country. We show that the measures of funding risk in Japan can explain 42% of the monthly currency carry trade returns during our sample period, 2000-2011. In addition, they explain 64% of the monthly foreign exchange volatility in our sample of ten main currencies, 28% of the speculators' net currency futures positions in Australian dollar versus Japanese yen, skewness in currency returns and currency crashes. We present a theoretical model that is consistent with these findings.

In this paper, we measure currency carry trade funding risk using stock market volatility and crash risk in Japan, the main funding currency country. We show that the measures of funding risk in Japan can explain 42% of the monthly currency carry trade returns during our sample period, 2000-2011. In addition, they explain 64% of the monthly foreign exchange volatility in our sample of ten main currencies, 28% of the speculators' net currency futures positions in Australian dollar versus Japanese yen, skewness in currency returns and currency crashes. We present a theoretical model that is consistent with these findings.

This paper presents a consumption-based general equilibrium model for valuing foreign exchange contingent claims. The model identifies a novel economic mechanism by exploiting highly but imperfectly shared consumption disaster with variable intensities which are the concerns to the representative investor under recursive utility. When applied to the data, the model simultaneously replicates (i) the moderate option-implied volatilities; (ii) substantial variations in the risk-neutral skewness of currency returns; (iii) the uncovered interest rate parity puzzle; and (iv) the first two moments of carry trade returns. Furthermore, the model rationalizes salient features of the aggregate stock, government bonds, and equity index options.

One of the most popular investment and trading strategies over the last decade, has been the currency carry trade, which allows traders and investors to buy high-yielding currencies in the Foreign Exchange spot market by borrowing, low or zero interest rate currencies in the form of pairs, such as the Australian Dollar/Japanese Yen (AUD/JPY), with the purpose of investing the proceeds afterwards into fixed-income securities.To be able to determine the causality between the returns of equity markets and the foreign exchange market, we choose to observe the sensitivity and influence of two equity indexes on several pairs involved in carry trading. The reason for studying these relationships is to further explain the causes of the uncovered interest parity puzzle, thus adding our contribution to the academic field through this thesis.To accomplish our goals, data was gathered for daily quotes of 16 different currency pairs, grouped by interest differentials, and two equity indexes, the S&P 500 and FTSE All-World, along with data for the VIX volatility index, for the 2003-2012 period. The data was collected from Thomson Reuters Datastream and the selected ten year span was divided into three different periods. This was done in order to discover the differences on how equity indexes relate to typical carry trade currency pairs, depending on market developments before, during and after the world financial crisis.The tests conducted on the collected data measured the correlations, influences and sensitivity for the 16 different currency pairs with the S&P 500 Index, the FTSE All-World index, and the volatility index between the years of 2003-2012. For influences and sensitivity, we performed Maximum Likelihood (ML) regressions with Generalized Autoregressive Conditional Heteroscedasticity (GARCH) [1,1], in Eviews software.After analyzing the results, we found that, during our chosen time period, the majority of currency pair daily returns are positively correlated

This dissertation consists of the three essays that allowed me to investigate three different economics phenomena. The discussion focuses on topics related to U.S. bank deregulation, China's resource misallocation and currency carry-trade strategy. In particularly, the aim is to study how U.S. bank deregulation is related to Great Moderation in U.S. between the mid-1980s and the start of the subprime debt crisis in 2007, what the implication of monetary policy with China's resource misallocation is and how a new carry trade method can be constructed.The first paper models the effect of bank deregulation on the volatility of output and firms dynamics. By introducing a cost channel and bank sector into Bilbiee, Ghironi and Melitz (2007)'s model, we test the volatility change under various shocks before and after bank deregulation. Simulations show that with the bank spread decreases by 1/3, the volatility of output and number of producers decrease significantly. This can provide a potential explanation for why the Great Moderation starts from the mid-1980s to mid-2000s.The second paper constructs a dynamic stochastic general equilibrium model of China with heterogeneous sectors and resource misallocation. Recent literature has shown that there is significant resource misallocation between state-owned firms and private firms in China. We find the presence of resource misallocation alters standard monetary policy conclusions in important ways. We show that there is an additional real effect of monetary policy--- an allocation effect. This is different from the standard New Keynesian framework, where the real effect comes from the price rigidity. Monetary policy shocks also exert heterogeneous effects on private firms and state-owned firms. Given a common shock, the output volatility of private firms is higher than that of state-owned firms. The model can easily be extended to other developing countries with similar situations.The third paper employs two methods to const

I uppsatsen analyseras valutaspekulationsstrategin carry trading och huruvida den kan generera positiv avkastning och överavkastning. Perioden som studeras är 1990 till och med första kvartalet 2012. Vidare undersöks om skillnader förekommer i överavkastningar från carry trades innan och under den nuvarande finanskrisen som startade kring 2008. Teorierna kurssäkrad- och icke kurssäkrad ränteparitet utvärderas då avvikelser från dessa påverkar handel med och avkastning från carry trade. Resultaten visar att avvikelser från icke kurssäkrad ränteparitet förekommer, vilket utgör ett villkor för möjlighet till positiv avkastning. Överavkastningar från carry trade visar sig generellt vara högre före finanskrisen än under för de inkluderade valutorna. De högsta individuella överavkastningarna observeras under krisen. Höga överavkastningar förklaras av stora räntedifferenser mellan de länder, vars valutor ingår i affären.

Publikace je určena na prvním místě těm politikům parlamentů všech zemí, kteří o fenoménu Carry trade zatím nic neví, a kteří jeho neovládáním nebo přehlížením a z toho plynoucí jimi nesprávně postavenou, zaměřenou, zákony schválenou, a poté i realizovanou státně-rozpočtovou politikou způsobují svým zemím významné a nevratné finanční ztráty. Dále je určena malým a středním podnikatelům, kterým pomůže prostřednictvím ziskového využití Carry trade zlepšit jejich pozici na trhu. Také je určena všem individuálním traderům a investorům na národních i světových finančních trzích, kteří o ní zatím nevědí – aby jejím využitím dosahovali v budoucnu zisky a nebyli (jak u nich bylo do doby její neznalosti) obvykle těmi, kteří se skládají na zisky znalců Carry trade. Nakonec je samozřejmě určena všem ekonomickým pedagogům – u těch by se měla stát jedním z jejich základních stavebních kamenů jejich ekonomických znalostí a dovedností., The publication is intended in the first place those politicians parliaments of all countries who have the phenomenon of carry trade yet knows nothing, and who because of their neglect and the resulting built them incorrectly, focused, laws approved, and then and the realized state-budget policy to their countries cause significant and irreversible financial losses. It is intended for small and medium-sized businesses, which will help carry through the profitable use of trade to improve their market position. It is also intended for all individual traders and investors in national and global financial markets, who know about it yet - to achieve its use in future profits and not (as they did until her ignorance) usually those who are made up of experts in profits Carry trade. Finally, of course, open to all economic teachers - those should become one of the basic building blocks of economic knowledge and skills.

This dissertation consists of the three essays that allowed me to investigate three different economics phenomena. The discussion focuses on topics related to U.S. bank deregulation, China's resource misallocation and currency carry-trade strategy. In particularly, the aim is to study how U.S. bank deregulation is related to Great Moderation in U.S. between the mid-1980s and the start of the subprime debt crisis in 2007, what the implication of monetary policy with China's resource misallocation is and how a new carry trade method can be constructed.The first paper models the effect of bank deregulation on the volatility of output and firms dynamics. By introducing a cost channel and bank sector into Bilbiee, Ghironi and Melitz (2007)'s model, we test the volatility change under various shocks before and after bank deregulation. Simulations show that with the bank spread decreases by 1/3, the volatility of output and number of producers decrease significantly. This can provide a potential explanation for why the Great Moderation starts from the mid-1980s to mid-2000s.The second paper constructs a dynamic stochastic general equilibrium model of China with heterogeneous sectors and resource misallocation. Recent literature has shown that there is significant resource misallocation between state-owned firms and private firms in China. We find the presence of resource misallocation alters standard monetary policy conclusions in important ways. We show that there is an additional real effect of monetary policy--- an allocation effect. This is different from the standard New Keynesian framework, where the real effect comes from the price rigidity. Monetary policy shocks also exert heterogeneous effects on private firms and state-owned firms. Given a common shock, the output volatility of private firms is higher than that of state-owned firms. The model can easily be extended to other developing countries with similar situations.The third paper employs two methods to const

Publikace je určena na prvním místě těm politikům parlamentů všech zemí, kteří o fenoménu Carry trade zatím nic neví, a kteří jeho neovládáním nebo přehlížením a z toho plynoucí jimi nesprávně postavenou, zaměřenou, zákony schválenou, a poté i realizovanou státně-rozpočtovou politikou způsobují svým zemím významné a nevratné finanční ztráty. Dále je určena malým a středním podnikatelům, kterým pomůže prostřednictvím ziskového využití Carry trade zlepšit jejich pozici na trhu. Také je určena všem individuálním traderům a investorům na národních i světových finančních trzích, kteří o ní zatím nevědí – aby jejím využitím dosahovali v budoucnu zisky a nebyli (jak u nich bylo do doby její neznalosti) obvykle těmi, kteří se skládají na zisky znalců Carry trade. Nakonec je samozřejmě určena všem ekonomickým pedagogům – u těch by se měla stát jedním z jejich základních stavebních kamenů jejich ekonomických znalostí a dovedností., The publication is intended in the first place those politicians parliaments of all countries who have the phenomenon of carry trade yet knows nothing, and who because of their neglect and the resulting built them incorrectly, focused, laws approved, and then and the realized state-budget policy to their countries cause significant and irreversible financial losses. It is intended for small and medium-sized businesses, which will help carry through the profitable use of trade to improve their market position. It is also intended for all individual traders and investors in national and global financial markets, who know about it yet - to achieve its use in future profits and not (as they did until her ignorance) usually those who are made up of experts in profits Carry trade. Finally, of course, open to all economic teachers - those should become one of the basic building blocks of economic knowledge and skills.

I uppsatsen analyseras valutaspekulationsstrategin carry trading och huruvida den kan generera positiv avkastning och överavkastning. Perioden som studeras är 1990 till och med första kvartalet 2012. Vidare undersöks om skillnader förekommer i överavkastningar från carry trades innan och under den nuvarande finanskrisen som startade kring 2008. Teorierna kurssäkrad- och icke kurssäkrad ränteparitet utvärderas då avvikelser från dessa påverkar handel med och avkastning från carry trade. Resultaten visar att avvikelser från icke kurssäkrad ränteparitet förekommer, vilket utgör ett villkor för möjlighet till positiv avkastning. Överavkastningar från carry trade visar sig generellt vara högre före finanskrisen än under för de inkluderade valutorna. De högsta individuella överavkastningarna observeras under krisen. Höga överavkastningar förklaras av stora räntedifferenser mellan de länder, vars valutor ingår i affären.

I nära tio år har främst amerikanska placerare utnyttjat strategin carry trade för att skapa positiva avkastningar. Strategin innebär att lån tas på en marknad med låga räntor för att sedan placeras på en annan marknad med högre räntor. Det är främst de japanska och amerikanska räntemarknaderna som har använts. Syftet med uppsatsen är att utreda om det går att få en positiv avkastning vid carry trade-affärer. Vi kommer även att belysa vilka risker som uppstår vid dessa investeringar, samt undersöka vad som kan göras för att minimera de risker som uppstår. Genom att studera andra länder med betydande räntedifferenser vill vi även utreda om denna strategi går att tillämpa på andra ränte- och valutamarknader än Japan och USA. För att uppfylla syftet har en kvantitativ studie genomförts baserad på sekundärdata, där vi skapat olika fiktiva affärer över tre tidsperioder för att kunna räkna ut och jämföra avkastningar. Vi har även undersökt olika hedgingstrategier för att se om det är något som en aktör kan använda sig av på ett effektivt sätt vid nämnda affärer. I teorikapitlet tar vi upp två relevanta teorier för arbetet, uncovered interest rate parity och covered interest rate parity. Den första teorin säger att om två länders räntor skiljer sig åt förväntas växelkursen mellan ländernas valutor att på sikt helt och hållet ta ut ränteskillnaden. Den andra teorin säger att en riskfri investering, oavsett land, alltid ska ge samma avkastning. Resultatet från undersökningen visar att teorin uncovered interest rate parity stämmer dåligt överens med vår empiri. I studien har vi funnit att det är möjligt att skapa positiva avkastningar om affärerna är riskfyllda. Covered interest rate parity motsvarar däremot empirin i mycket hög grad. Undersökningen har inte resulterat i några lämpliga metoder att använda för att hedga carry trade-affärer mot valutarisken. Studien visar även på att det går att göra lyckade carry trade-affärer på andra marknader än Japan och USA.

I nära tio år har främst amerikanska placerare utnyttjat strategin carry trade för att skapa positiva avkastningar. Strategin innebär att lån tas på en marknad med låga räntor för att sedan placeras på en annan marknad med högre räntor. Det är främst de japanska och amerikanska räntemarknaderna som har använts. Syftet med uppsatsen är att utreda om det går att få en positiv avkastning vid carry trade-affärer. Vi kommer även att belysa vilka risker som uppstår vid dessa investeringar, samt undersöka vad som kan göras för att minimera de risker som uppstår. Genom att studera andra länder med betydande räntedifferenser vill vi även utreda om denna strategi går att tillämpa på andra ränte- och valutamarknader än Japan och USA. För att uppfylla syftet har en kvantitativ studie genomförts baserad på sekundärdata, där vi skapat olika fiktiva affärer över tre tidsperioder för att kunna räkna ut och jämföra avkastningar. Vi har även undersökt olika hedgingstrategier för att se om det är något som en aktör kan använda sig av på ett effektivt sätt vid nämnda affärer. I teorikapitlet tar vi upp två relevanta teorier för arbetet, uncovered interest rate parity och covered interest rate parity. Den första teorin säger att om två länders räntor skiljer sig åt förväntas växelkursen mellan ländernas valutor att på sikt helt och hållet ta ut ränteskillnaden. Den andra teorin säger att en riskfri investering, oavsett land, alltid ska ge samma avkastning. Resultatet från undersökningen visar att teorin uncovered interest rate parity stämmer dåligt överens med vår empiri. I studien har vi funnit att det är möjligt att skapa positiva avkastningar om affärerna är riskfyllda. Covered interest rate parity motsvarar däremot empirin i mycket hög grad. Undersökningen har inte resulterat i några lämpliga metoder att använda för att hedga carry trade-affärer mot valutarisken. Studien visar även på att det går att göra lyckade carry trade-affärer på andra marknader än Japan och USA.

This paper applies the gradual information diffusion hypothesis, which suggests that information spreads gradually across asset markets, leading to cross-asset return predictability, to explain the role of speculator activity in the cross-asset return predictability of foreign exchange (FX) market strategies. We argue that the activity of speculators should increase the rate of information diffusion across asset markets. Hence, we expect the predictability from of the equity and commodity markets to predict the FX market would to be weaker when speculators are active in the FX market. Our results show that, when speculator activity is high, predictability from the equity market’s ability to predict the FX market dissipates, but not to the same extent as for the commodity market. Our findings suggest that speculators play a vital role in enhancing informational efficiency in the FX market.

In this paper, I study the patterns of hedge fund herding in currency future contracts and find evidence that hedge funds herd. High-interest (low-interest) currencies have higher buy-side (sell-side) herding consistent with carry trade positions. I then propose a strategy herding measure that I use to track hedge fund herding in the carry trade strategy. I find that hedge fund carry trade strategy herding positively predicts future returns, a result that is robust to a host of other measures of activity. I find no that hedge fund herding is destabilizing, and investors can improve performance by following hedge fund herding behavior in the carry trade.

[Abstract] The Sharpe Ratio offers an excellent summary of the excess return required per unit of risk invested. This work presents an adaptation of the ex-ante Sharpe Ratio for currencies where we consider a random walk approach for the currency behavior and implied volatility as a proxy for market expectations of future realized volatility. The outcome of the proposed measure seems to gauge some information on the expected required return attached to the “peso problem”.