Crash Risk in Currency Returns
建立了一个双边汇率模型，包含随机波动和跳跃，发现汇率跳跃概率与利率相关，方差跳跃概率仅与方差相关，跳跃平均占货币风险的25%，且跳跃风险被定价。
We develop an empirical model of bilateral exchange rates. It includes normal shocks with stochastic variance and jumps in an exchange rate and in its variance. The probability of a jump in an exchange rate corresponding to depreciation (appreciation) of the U.S. dollar is increasing in the domestic (foreign) interest rate. The probability of a jump in variance is increasing in the variance only. Jumps in exchange rates are associated with announcements; jumps in variance are not. On average, jumps account for 25% of currency risk. The dollar carry index retains these features. Options suggest that jump risk is priced.