Quadratic, Cubic and Quartic Moment Risk Premiums in Currency Markets

60 Pages Posted: 20 Jun 2015 Last revised: 28 Jul 2016

See all articles by Claudia Zunft

Claudia Zunft

Goethe University Frankfurt - Department of Finance; Quoniam Asset Management GmbH

Date Written: January 1, 2016


A moment risk premium is the difference between a realized and the corresponding implied moment. I establish the existence of non-zero moment risk premiums in currency markets. Quadratic and quartic risk premiums are mostly negative whereas cubic premiums do not exhibit a predominant sign. The economic and statistical significance of moment risk premiums increases, first, in contract maturity and, second, in moment order. Moment risk premiums cannot be explained by traditional risk factors in currency markets. State-of-the-art option pricing models provide a model-based foundation of the maturity pattern of the risk premiums.

Keywords: currency options, model-free implied moments, power contracts, moment risk premiums

JEL Classification: G12, G13, G15

Suggested Citation

Zunft, Claudia, Quadratic, Cubic and Quartic Moment Risk Premiums in Currency Markets (January 1, 2016). 28th Australasian Finance and Banking Conference, Available at SSRN: https://ssrn.com/abstract=2620246 or http://dx.doi.org/10.2139/ssrn.2620246

Claudia Zunft (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

Mertonstr. 17
Frankfurt, 60054

Quoniam Asset Management GmbH ( email )


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics