This is an asset pricing question. What is the difference between conditional and unconditional risk premia? Here's the context:

The fact that carry trade strategies typically earn positive average returns is a manifestation of the failure of the uncovered interest parity (UIP) hypothesis, a major longstanding puzzle in international finance. A longstanding consensus in the international finance literature attributed all of carry trade average returns to conditional risk premia, finding little evidence of nonzero unconditional risk premia on individual currencies throughoutmost ofthe 20th century (e.g., Lewis (1995)) Consequently, much of the literature has focused on explaining conditional currency risk premia by ruling out asymmetries (e.g., Verdelhan (2010), Bansal and Shaliastovich (2012), Colacito and Croce (2013)). However, Lustig, Roussanov, and Verdelhan (2011) show that unconditional currency risk premia are, in fact, substantial and Hassan and Mano (2014) further argue that they drive the bulk of carry trade profits.

Some explanation, and / or a reference would be greatly helpful.


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