We document that governments whose local currency debt provides them with greater
hedging benefits actually borrow more in foreign currency. We introduce two features into a …

We assume that domestic (foreign) agents, when investing abroad, can only trade in the
foreign (domestic) risk-free rates. In a preference-free environment, we derive the exchange …

We propose and estimate a quantitative model of exchange rates in which participants in the
foreign exchange market are intermediaries subject to value-at-risk (VaR) constraints …

We develop a restriction that precludes implausibly high reward-for-risk in incomplete
international economies to consider a theoretical problem that characterizes a lower bound …

Empirical moments of asset prices and exchange rates imply that pricing kernels are almost
perfectly correlated across countries. Otherwise, observed real exchange rates would be too …

Exchange rate volatility falls after a trade deal, driven by a decline in the systematic
component of risk. The average trade deal increases trade by 50 percent over five years …

We completely characterize the fundamental relationship between the exchange rate and
the asset pricing in the two denomination currencies involved when markets are incomplete …

We introduce the concept of risk entanglement in a preference-free setting to jointly explain
the exchange rate volatility, cyclicality, and currency risk premia in the data. Risk …

I develop a general characterization of the effect that market incompleteness has on
exchange rate dynamics. On the one hand, it weakens the pass-through from marginal utility …

I provide new evidence that incomplete consumption risk sharing across countries is an
important determinant of carry trade returns. I show that there is a strong co-movement in …