This article reviews the predictability evidence on the variance risk premium:(a) It predicts
significant positive risk premia across equity, bond, currency, and credit markets;(b) the …

We establish currency as an important factor shaping global portfolios. Using a new security-
level data set, we demonstrate that investor holdings are biased toward their own currencies …

We propose a new model of exchange rates, based on the hypothesis that the possibility of
rare but extreme disasters is an important determinant of risk premia in asset markets. The …

We propose a text‐based method for measuring the cross‐border propagation of large
shocks at the firm level. We apply this method to estimate the expected costs, benefits, and …

This article reviews the literature on currency and country risk with a focus on their
macroeconomic origins and implications. A growing body of evidence shows that countries …

We show that a global imbalance risk factor that captures the spread in countries' external
imbalances and their propensity to issue external liabilities in foreign currency explains the …

Persistent interest rate differentials account for much of the currency carry trade profitability.“
Commodity currencies” offer high interest rates on average, while countries that export …

Separate literatures study violations of uncovered interest parity (UIP) using regression-
based and portfolio-based methods. We propose a decomposition of these violations into a …

When central banks adjust interest rates, the opportunity cost of lending in local currency
changes, but—absent frictions—there is no spillover effect to lending in other currencies …

We develop an asset pricing model with heterogeneous exposure to a persistent world
growth factor to identify global growth and financial shocks in a multicountry panel VAR in …