Intertemporal risk-return trade-off in foreign exchange rates

Charlotte Christiansen

Journal of International Financial Markets, Institutions and Money, 2011, vol. 21, issue 4, 535-549

Abstract: We investigate the intertemporal risk-return trade-off of foreign exchange (FX) rates for ten currencies quoted against the USD. For each currency, we use three risk measures simultaneously that pertain to that currency; its realized volatility, its realized skewness, and its value-at-risk. We apply monthly FX excess returns and risk measures calculated from daily observations. We find that there is a significant contemporaneous risk-return trade-off for the currencies under investigation. There is no evidence of noncontemporaneous risk-return trade-off. We pay special attention to the risk-return trade-off during the recent financial crisis.

Keywords: Foreign; exchange; rates; Risk-return; trade-off; Realized; volatility; Realized; skewness; Value-at-risk (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (7)

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Working Paper: Intertemporal Risk-Return Trade-off in Foreign Exchange Rates (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:21:y:2011:i:4:p:535-549

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