SAFE Visitors Program joint with Finance Brown Bag Seminar: Pasquale Della Corte (Imperial College London)

26 Oct 2022 14:00 PM
26 Oct 2022 15:00 PM

The SAFE Visitors Program joint with the Finance Chair organize a brown bag seminar on

Expected Currency Returns

Prof. Pasquale Della Corte, PhD
Associate Professor of Finance at Imperial College Business School, 
Imperial College London

(the paper is co-authored with Can Gao and Alexandre Jeanneret)

Venue: room HoF 1.02 (SAFE common room) and online

Abstract: We study the term structure of expected risk premia and risk preferences in foreign exchange (FX) markets. We first show theoretically that we can extract a utilityfree measure of risk preferences and then estimate this measure using expected excess returns from professional forecasters and expected risk premia implied from option prices. We find that investor preferences reflect a strong aversion to high-order risk, thus departing from the log utility framework considered by Kremens and Martin (2019). Also, unconditionally, the term structure of risk preferences is downwardsloping. Conditionally, the slope of term structure becomes even more negative in bad times but it is upward-sloping in good times. Hence, fear of high-order risk is greater in the shorter term during bad times, but greater in the longer term during good times. We thus provide novel insights on the conditional term structure of risk preferences.

Prof. Della Corte will teach a 9-hour PhD-level mini-course on "Advanced Topics in International Finance"