Publications [#291862] of A. Craig Burnside

Journal Articles

1. Burnside, C; Eichenbaum, M; Kleshchelski, I; Rebelo, S, Do peso problems explain the returns to the carry trade?, Review of Financial Studies, vol. 24 no. 3 (March, 2011), pp. 853-891, Oxford University Press (OUP), ISSN 0893-9454 [repository], [doi]
   (last updated on 2026/01/17)

   Abstract:
   We study the properties of the carry trade, a currency speculation strategy in which an investor borrows low-interest-rate currencies and lends high-interest-rate currencies. This strategy generates payoffs that are on average large and uncorrelated with traditional risk factors. We argue that these payoffs reflect a peso problem. The underlying peso event features high values of the stochastic discount factor rather than very large negative payoffs. © 2010 The Author Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.