Starjournal Quotation Della Corte, Pasquale, Sarno, Lucio, Schmeling, Maik, Wagner, Christian. 2021. Exchange Rates and Sovereign Risk. Management Science (MS).




An increase in a country's sovereign risk, as measured by credit default swap spreads, is accompanied by a contemporaneous depreciation of its currency and an increase of its volatility. The relation between currency excess returns and sovereign risk is mainly driven by default expectations (rather than distress risk premia) and exposure to global sovereign risk shocks, and also emerges in a predictive setting for currency risk premia. We show that a sovereign risk factor is priced in the cross-section of currency returns and that it is not subsumed by the carry factor.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Management Science (MS)
Citation Index SSCI
WU Journalrating 2009 A+
Starjournal Y
Language English
Title Exchange Rates and Sovereign Risk
Year 2021
Reviewed? Y
Open Access N
JEL F31, G12, G15


Wagner, Christian (Details)
Della Corte, Pasquale (Imperial College London, United Kingdom)
Sarno, Lucio (University of Cambridge, United Kingdom)
Schmeling, Maik (Goethe University Frankfurt, Germany)
Institute for Finance, Banking and Insurance IN (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5361 Financial management (Details)
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