Currency fundamentals, implied volatility, and FX investment strategies as NOK determinants
Abstract
We study which factors determine the Norwegian krone at the weekly
frequency. We show the existence of a relation between the EURNOK depreciation
rate and changes in oil prices, implied volatility indices, and the excess returns on
carry trade and value FX investment strategies. In particular, our findings suggest
that the Norwegian krone is exposed to global risks proxied by the implied volatility
indices and carry trade factor, is not exposed to the momentum factor, and has a
risk discount as proxied by the value factor.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2019