Do peso problems explain the returns to the carry trade?

doi:10.1093/rfs/hhq138

dc.contributor.author	Burnside, C
dc.contributor.author	Eichenbaum, M
dc.contributor.author	Kleshchelski, I
dc.contributor.author	Rebelo, S
dc.date.accessioned	2010-03-09T15:41:26Z
dc.date.issued	2011-03-01
dc.identifier.citation	Review of Financial Studies, 2011, 24 (3), pp. 853 - 891
dc.identifier.issn	0893-9454
dc.identifier.uri	http://hdl.handle.net/10161/2017
dc.description.abstract	We study the properties of the carry trade, a currency speculation strategy in which an investor borrows low-interest-rate currencies and lends high-interest-rate currencies. This strategy generates payoffs that are on average large and uncorrelated with traditional risk factors. We argue that these payoffs reflect a peso problem. The underlying peso event features high values of the stochastic discount factor rather than very large negative payoffs. © 2010 The Author Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.
dc.format.extent	853 - 891
dc.format.mimetype	application/pdf
dc.language.iso	en_US
dc.relation.ispartof	Review of Financial Studies
dc.relation.isversionof	10.1093/rfs/hhq138
dc.title	Do peso problems explain the returns to the carry trade?
dc.type	Journal Article
dc.department	Economics
pubs.issue	3
pubs.organisational-group	/Duke
pubs.organisational-group	/Duke/Trinity College of Arts & Sciences
pubs.organisational-group	/Duke/Trinity College of Arts & Sciences/Economics
pubs.publication-status	Published
pubs.volume	24
dc.identifier.eissn	1465-7368