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Systemic risk in carry-trade portfolios

Listed author(s):
  • Liu, Chih-Liang
  • Yang, Hsin-Feng
Registered author(s):

    Risk contagion between carry trade portfolios and stock markets had been explored in literatures, leaving inconsistent controversy. Instead of exploring ordinary return-volatility spillovers, this paper focuses on a systemic contagion, the tail risk conditional on extreme events in other markets. Using a conditional value-at-risk (CoVaR) model, we contribute to this line of literature by showing that there is bilateral systemic contagion between carry trades and stock markets in the U.S., European, or Asia-Pacific regions. Such a systemic contagion is particularly significant during the 2000–2001 dot-com bubble and 2007–2009U.S. credit crisis.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1544612316301623
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    Article provided by Elsevier in its journal Finance Research Letters.

    Volume (Year): 20 (2017)
    Issue (Month): C ()
    Pages: 40-46

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    Handle: RePEc:eee:finlet:v:20:y:2017:i:c:p:40-46
    DOI: 10.1016/j.frl.2016.09.007
    Contact details of provider: Web page: http://www.elsevier.com/locate/frl

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