Wenxin Du is with the Federal Reserve Board. Alexander Tepper is with the Columbia Graduate School of Architecture, Planning and Preservation. A large part of this research was conducted while Alexander Tepper was working at the Federal Reserve Bank of New York. Adrien Verdelhan is with MIT Sloan and NBER. The authors thank the Editor, Stefan Nagel, and two anonymous referees. The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or any other person associated with the Federal Reserve System. We thank Claudio Borio, Francois Cocquemas, Pierre Collin‐Dufresne, Doug Diamond, Charles Engel, Xavier Gabaix, Benjamin Hebert, Sebastian Infante, Arvind Krishnamurthy, Martin Lettau, Hanno Lustig, Matteo Maggiori, Robert McCauley, Tyler Muir, Warren Naphtal, Brent Neiman, Pierre‐Olivier Gourinchas, Jonathan Parker, Thomas Philippon, Arvind Rajan, Adriano Rampini, Fabiola Ravazzolo, Andrew Rose, Hyun Song Shin, Jeremy Stein, Steve Strongin, Saskia ter Ellen, Fabrice Tourre, Annette Vissing‐Jorgensen, and seminar and conference participants at the AFA meeting in Chicago, the Bank of Canada, the Bank of England, the Bank for International Settlements, Berkeley, Chicago, the European Central Bank, the Federal Reserve Board, the Federal Reserve Bank of Dallas, the Federal Reserve Bank of Philadelphia, the Federal Reserve Bank of San Francisco, Harvard, the International Monetary Fund, MIT Sloan, the NBER Summer Institute, Northwestern, Stanford GSB, UNC Chapel Hilll, Wisconsin‐Madison, Wharton, Vanderbilt, and Washington University for comments and suggestions. All remaining errors are our own. The paper previously circulated under the title “Cross‐currency Basis.” We have read the Journal of Finance's disclosure policy and have no conflicts of interest to disclose.
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