FX Strategies in Periods of Distress

12 Pages Posted: 5 Sep 2012

See all articles by Jacob Gyntelberg

Jacob Gyntelberg

Nordea Group; University of Copenhagen - Department of Economics

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: December 12, 2011

Abstract

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

Gyntelberg, Jacob and Schrimpf, Andreas, FX Strategies in Periods of Distress (December 12, 2011). BIS Quarterly Review, December 2011. Available at SSRN: https://ssrn.com/abstract=1971145

Jacob Gyntelberg (Contact Author)

Nordea Group ( email )

Grønjordsvej 10
Copenhagen, DK - 2300
Denmark

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5, Bygn 26
Copenhagen, 1353
Denmark

Andreas Schrimpf

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

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