The Carry Trade: Risks and Drawdowns Available to Purchase

This research was supported by a grant from the Network for Study on Pensions, Aging, and Retirement to the Columbia Business School. We thank two anonymous referees, Craig Burnside, Mike Chernov, Victoria Dobrynskaya, Pab Jotikasthira, Campbell Harvey, Hanno Lustig, Nick Roussanov, Ivo Welch and the participants of the 2015 NBER International Asset Pricing Summer Institute, the 2016 Vanderbilt FMRC Conference on International Finance, and the 2016 China International Conference in Finance for helpful comments and suggestions. We especially thank Pierre Collin-Dufresne for many substantive early discussions that were fundamental to the development of the paper. We also thank Elessar Chen for his research assistance, and Ken French, Jakub Jurek, Tracy Johnson, Lucio Sarno, Maik Schmeling, and Adrien Verdelhan for providing data.