Paper Title
The Pricing of Unexpected Volatility in The Currency Market
Abstract
number of recent papers have investigated the role played by volatility in determining the cross section of
currency returns. We show that the importance of volatility depends on whether the currency markets are unexpectedly
volatile. Low volatility is largely unrewarded in the market, whereas high volatility is a risk which has a substantial impact on
returns.
Index Terms - carry trade, currency portfolios, trading strategies.