Jumps in Foreign Exchange Rates and Stochastic Unwinding of Carry Trades
Jumps in Foreign Exchange Rates and Stochastic Unwinding of Carry Trades
复制标题
外汇汇率的上涨和套利交易的随机平仓
DOI：
10.1016/j.iref.2010.07.010
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发表时间：
2011
影响因子：
4.5
通讯作者：
Vladyslav Sushko
中科院分区：
文献类型：
--
作者：
Makoto Nirei;Vladyslav Sushko
Tails in the distribution of JPY/USD exchange rate returns are well approximated by an exponentially dampened power-law. Distribution parameter estimates indicate that yen appreciation jumps belong to a Levy process with unbounded variation, suggesting that same mechanism may be responsible for fluctuations in normal times as well as rare crashes. In contrast, yen depreciation jumps have a well defined second moment suggesting a Gaussian regime. In addition, extreme episodes of yen appreciation are larger and more persistent than episodes of yen depreciation. The asymmetry is magnified and power-law tails are more elongated during times of higher interest rate differential between U.S. and Japan and higher level of VIX indicating that carry trade may be the driver. We propose a model of strategic carry trader behavior that in equilibrium generates exponentially dampened power-law distribution of jumps in foreign exchange along with “up by the stairs down by the elevator” dynamics arising from the assymetries between negative and positive jumps.
