Rare Disasters and Exchange Rates

By Emmanuel Farhi, Xavier Gabaix. 2008

450 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/bda342ce790abdc5cca26cc07bb2e460ecf9d08e

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Citations in the corpus

Carry Trade and Momentum in Currency Markets (2011, background): “Authors such as Jurek (2008), Farhi & Gabaix (2008), Farhi et al. (2009), and Burnside et al. (2011) have argued that the payo!s to the carry trade can, at least in part, be explained by the presence of rare disasters or peso problems.11 By rare disasters we mean very low probability events that…”
The Forward Market in Emerging Currencies: Less Biased Than in Major Currencies (2010, background): “…and van Wincoop (2005), Backus, Foresi and Telmer (2002), Breuer (2000), Verschoor and Wolff (2001), Lustig and Verdelhan (2005), Verdelhan (2006), Lustig, Roussanov and Verdelhan (2008), Burnside, Eichenbaum, and Rebelo (2007), Gospodinov (2009), and Farhi and Gabaix (2008), among others.”
Ambiguity Aversion: Implications for the Uncovered Interest Rate Parity Puzzle (2012, background): “…is a recent risk-based theoretical literature, including for example Verdelhan (2008), Bansal and Shaliastovich (2007), Alvarez et al. (2008) and Farhi and Gabaix (2008) that argues that the typical empirical exercises are unable by construction to capture the underlying time-variation in risk.”
Crash Risk in Currency Markets (2015, unknown): “For example, in Farhi and Gabaix (2013) the relative exchange rate between two countries is driven by the difference in resiliences of the two countries, which is exactly π D in our notations (in the limit of small time intervals and resiliences).”
Rare Macroeconomic Disasters (2012, background): “The main ideas are well explained by Farhi and Gabaix (2011).”
Currency Premia and Global Imbalances (2016, unknown): “…(the riskiest currencies), are 4Other papers studying carry trade returns include Brunnermeier, Nagel and Pedersen (2009), Christiansen, Ranaldo and Söderlind (2011), Colacito and Croce (2013), Farhi and Gabaix (2014), Farhi, Fraiberger, Gabaix, Ranciere and Verdelhan (2014) and Jurek (2014).”
Borrowers under water! Rare disasters, regional banks, and recovery lending (2020, background): “From an ex ante perspective alone, credit supply for Californian properties exposed to earthquake risk for example, is significantly lower than that for similar properties that are less exposed to disaster risk (Garmaise and Moskowitz, ity, forward premium puzzles, co-movement of asset prices, and o”
Rare Disasters and Risk Sharing with Heterogeneous Beliefs (2011, background): “Among these studies are Liu, Pan, and Wang (2005), Gabaix (2009), Wachter (2009), Farhi and Gabaix (2009), Martin (2008), and others.”
International Currencies and Capital Allocation (2020, unknown): “solution of a frictionless portfolio choice as in Solnik (1974), Adler and Dumas (1983), Engel and Matsumoto (2009), and Coeurdacier and Gourinchas (2016), or exogenously by postulating that households invest abroad in bonds denominated in their own domestic currency as in Gabaix and Maggiori (2015)”
Variance Risk Premiums and the Forward Premium Puzzle (2012, unknown): “…in exchange rate movements and find that crash-hedged carry trade strategies yield significantly lower returns than traditional carry trade strategies.2 Finally, Mueller, Stathopolous, and Vedolin (2012) 2The rare disaster model in Farhi and Gabaix (2011) aims to rationalize this empirical finding.”
Disaster Risk and its Implications for Asset Pricing (2015, unknown): “…πt− = µπ dt+ σπ dBt + (e Zπ − 1) dNt. (1) 1This result unifies results already reported in the literature, for, e.g. iid models of stock prices (Barro (2006)), dynamic models of stock prices (Longstaff and Piazzesi (2004) and Wachter (2013), and exchange rate models (Farhi and Gabaix (2014)).”
Predictability of Returns and Cash Flows (2011, background): “Several structural models have been shown to generate predictable (and counter-cyclical) currency returns (e.g., Bansal and Shaliastovich, 2010; Verdelhan, 2010; Gabaix and Farhi, 2009).”
Properties of Foreign Exchange Risk Premiums (2012, background): “…Bekaert and Hodrick (1993), Bansal et al. (1995), Bekaert (1996), Bekaert et al. (1997), Lustig and Verdelhan (2007), Brunnermeier et al. (2008), Farhi and Gabaix (2011), Jurek (2009), Lustig et al. (2011), Verdelhan (2010), Bansal and Shaliastovich (2010), Farhi et al. (2009), and Menkhoff et…”