@techreport{NBERw14054,
 title = "Do Peso Problems Explain the Returns to the Carry Trade?",
 author = "A. Craig Burnside and Martin S. Eichenbaum and Isaac Kleshchelski and Sergio Rebelo",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "14054",
 year = "2008",
 month = "June",
 URL = "http://www.nber.org/papers/w14054",
 abstract = {We study the properties of the carry trade, a currency speculation strategy in which an investor borrows low-interest-rate currencies and lends high-interest-rate currencies. This strategy generates payoffs which are on average large and uncorrelated with traditional risk factors. We argue that these payoffs reflect a peso problem. The underlying peso event features high values of the stochastic discount factor rather than very large negative payoffs.},
}