【金融高端论坛】 第一百零七期

主 题：A Credit-Based Theory of the Currency Risk Premium

主讲人: Pasquale Della Corte（帝国理工大学商学院副教授）

时 间：2019-11-27 10:00

地 点：明德商学楼1008室

Abstract：

This paper extends the work of Kremens and Martin (2019) and uncovers a novel component for exchange rate predictability. Our theory shows that currency returns compensate investors for the expected currency depreciation in the case of a severe but rare credit event. We compute this risk compensation– the credit-implied risk premium (CRP) – by exploiting the price difference between sovereign credit default swaps denominated in different currencies. Using data for 17 Eurozone countries over

the period 2010-19, we find that CRP positively forecasts the euro-dollar exchange rate return between one-week and six-month horizon, both in-sample and out-of-sample. We also show that currency trading strategies that exploit the informative content of CRP generate substantial out-of-sample economic value.

Keywords: Exchange rate, predictability, risk premium, credit risk, sovereign default

BIO:

Professor Pasquale DELLA CORTE is an Associate Professor of Finance at Imperial College Business School, and serves as an Associate Editor of the Journal of Money, Credit and Banking (JMCB).

Pasquale’s research focuses on international finance, global asset allocation, empirical asset pricing, portfolio choice, market microstructure, and Bayesian econometrics, and has been published in the Journal of Financial Economics, the Review of Financial Studies and the Review of Economics and Statistics. His research has also received the INQUIRE UK 2010 and INQUIRE UK 2011 Best Paper Awards, and KEPOS CAPITAL Award for the Best Paper on Investments at the 2013 WFA meetings.