Papers study currency carry trade, options-based credit spreads
Two sets of researchers were named co-winners of the $100,000 prize in AQR Capital Management's Insight Awards for their papers on currency carry trade strategy and an options-based approach to credit risk analysis.
Robert Ready, assistant professor of finance, Simon Business School, University of Rochester; Nikolai Roussanov, associate professor of finance, Wharton School, University of Pennsylvania; and Colin Ward, assistant professor of finance, Carlson School of Management, University of Minnesota, co-authored “Commodity Trade and the Carry Trade: A Tale of Two Countries.”
Christopher L. Culp, senior adviser, Compass Lexecon, research fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and Study of Business Enterprise, adjunct professor at the Swiss Finance Institute, and adjunct professor at Universitat Bern in the Institut fur Finanzmanagement; Yoshio Nozawa, economist, Board of Governors of the Federal Reserve System; and Pietro Veronesi, Roman Family Professor of Finance, University of Chicago Booth School of Business, co-authored “Option-Based Credit Spreads.”
The six researchers will share the prize money, financed by AQR.
The award, first awarded in 2012, “honors exceptional, unpublished papers that provide original, intelligent approaches to important issues in the investment world,” according to an AQR statement.
David G. Kabiller, AQR founding principal, said in a separate statement the carry trade paper provides “an interesting framework that allows for institutional investors to analyze” linkages of “real-economic fundamentals such as comparative advantages, production frictions, and trade flows to exchange rates and the currency carry trade.”
The credit spreads paper conducts “a thorough empirical study of the relationship between the credit spread puzzle and the volatility risk premium puzzle,” providing “institutional investors with a better understanding,” Mr. Kabiller said.
Authors of each finalist paper presented and discussed their research before a 19-member AQR award selection committee and some AQR clients, an AQR spokesman said. Along with Mr. Kabiller, other members of the committee are all principals or consultants with AQR or its affiliate CNH Partners.
The papers are posted on the AQR Insight Awards website.