Gianni Parisi & Andrea Landini

Dynamics and Risks of Carry Trade Strategies in Modern Financial Markets

Published on: 10 November 2024

Authors: Gianni Parisi, Andrea Landini

This paper examines carry trade strategies, focusing on market reactions to interest rate changes and currency interventions. It explores how carry trades leverage interest rate differentials, with investors borrowing in low-yield currencies to invest in higher-return assets. The study reviews types of carry trades, such as currency and asset-based, and discusses risks like currency, interest rate, and liquidity. The Dollar-Yen carry trade, affected by Bank of Japan interventions, illustrates the strategy's volatility.

Stochastic Model & Multivariate Markov-switching GARCH of Gold Price Dynamics

Not Yet Published

Authors: Gianni Parisi, Andrea Landini

This study investigates modeling gold price dynamics using Stochastic Models and Multivariate Markov-switching GARCH (MSGARCH), which capture volatility, regime shifts, and asset dependencies. MSGARCH identifies volatility phases, while stochastic models address long-term trends and sudden shifts.

Modeling of Interest Rate Swaps with Stochastic Volatility and Regime-Switching

Not Yet Published

Authors: Gianni Parisi, Andrea Landini

Interest rate swaps (IRS) are vital tools for managing interest rate exposure, offering flexibility in cash flow and hedging strategies. This analysis employs stochastic volatility models and regime-switching GARCH to capture dynamic fluctuations, mean reversion, and volatility clustering in IRS markets.