FX Strategies in Periods of Distress
12 Pages Posted: 5 Sep 2012
Date Written: December 12, 2011
This article presents an overview of widely practiced short-term multi-currency investment strategies such as carry trade, momentum and term spread strategies. We provide evidence on their downside risk properties and illustrate their performance over historical episodes of financial market turmoil. We show that the strategies exhibit substantial tail risks and that they do not perform uniformly during distress periods in global markets. Interestingly, equity market investments feature even greater downside risk.
JEL Classification: F31, G11, G15
Suggested Citation: Suggested Citation