Imperial College London
Alternate

Professor Pasquale Della Corte

Business School

Professor of Finance
 
 
 
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Contact

 

+44 (0)20 7594 9331p.dellacorte CV

 
 
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Location

 

5.01d53 Prince's GateSouth Kensington Campus

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Summary

 

Publications

Citation

BibTex format

@article{Della:2016:10.1016/j.jfineco.2016.02.015,
author = {Della, Corte P and Ramadorai, T and Sarno, L},
doi = {10.1016/j.jfineco.2016.02.015},
journal = {Journal of Financial Economics},
pages = {21--40},
title = {Volatility risk premia and exchange rate predictability},
url = {http://dx.doi.org/10.1016/j.jfineco.2016.02.015},
volume = {120},
year = {2016}
}
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RIS format (EndNote, RefMan)

TY  - JOUR
AB  - We discover a new currency strategy with highly desirable return and diversification properties, which uses the predictive ability of currency volatility risk premia for currency returns. The volatility risk premium—the difference between expected realized volatility and model-free implied volatility—reflects the costs of insuring against currency volatility fluctuations. The strategy sells high insurance-cost currencies and buys low insurance-cost currencies. A distinctive feature of the strategy’s returns is that they are mainly generated by movements in spot exchange rates instead of interest rate differentials. We explore explanations for the profitability of the strategy, which cannot be understood using traditional risk factors.
AU  - Della,Corte P
AU  - Ramadorai,T
AU  - Sarno,L
DO  - 10.1016/j.jfineco.2016.02.015
EP  - 40
PY  - 2016///
SN  - 0304-405X
SP  - 21
TI  - Volatility risk premia and exchange rate predictability
T2  - Journal of Financial Economics
UR  - http://dx.doi.org/10.1016/j.jfineco.2016.02.015
UR  - http://hdl.handle.net/10044/1/39815
VL  - 120
ER  -
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