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Results for “UIP” · papers 4 · wiki 1
Academic Papers · 4arXiv q-fin live 4 · desk corpus 0
arXiv · arXiv q-fin · 2025
This paper examines the empirical failure of uncovered interest parity (UIP) and proposes a structural explanation based on a mean-reverting risk premium. We define a realized premium as the deviation between observed exchange rate returns and the interest rate differential, and demonstrate its strong mean-reverting behavior across multiple horizons. Motivated by this pattern, we model the risk premium using an Ornst…
SeungJae Hwang
arXiv · arXiv q-fin · 2014
Currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the markets have rational risk-neutral investors, then one would not expect profits from such strategies. Th…
Matthew Ames, Gareth W. Peters, Guillaume Bagnarosa, Ioannis Kosmidis
arXiv · arXiv q-fin · 2013
The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the markets have rational risk-neutral investors, then one would not expect profits from such strategies…
Matthew Ames, Guillaume Bagnarosa, Gareth W. Peters
arXiv · arXiv q-fin · 2013
We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a multivariate Black and Scholes model, while nontraded asset prices evolve as generalized Ornstein-Uhlenbeck processes. We provide a BSDE characterization of the utility indifferenc…
Giuseppe Benedetti, Luciano Campi
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