This page contains an overview of my current working papers and work-in-progress. Comments are welcome.

  • "Carry trades and debt imbalances"
    Jonas N. Eriksen and Mads M. Kjær
    Working paper, 2025
    working paper

    Abstract:

    The G10 carry trade embeds a borrower-lender mismatch tied to net foreign debt imbalances: it buys high-interest-rate borrowers and sells low-interest-rate lenders. We link the carry trade's exposure to crash and global risk to an unpriced component that originates from the mismatch, while its risk premium and pricing ability are driven by interest rate differentials among borrower currencies (debtor carry). Debtor carry emerges as a priced risk factor that belongs to the SDF, even when accounting for existing currency factors. These findings challenge theories linking carry trade returns to crash and volatility risk and provide a new benchmark for understanding currency risk premia.


  • "Carbon tilts and factor returns"
    Jonas N. Eriksen, Magnus B. Frische, and Niels S. Grønborg
    Working paper, 2025


    Abstract:

    Carbon transition risk plays a growing role in asset prices and is central to the sustainability debate. This paper examines the pricing of carbon transition risk in U.S. equity factor returns using carbon tilts, defined as the value-weighted difference in carbon transition risk between a factor’s long and short legs. While carbon-intensive factors earn lower realized returns, expected returns inferred from the implied cost of capital indicate a positive carbon premium, consistent with theoretical predictions. This carbon premium increases over time and with climate concerns, and its pricing effects are most pronounced for investment styles related to profitability, investment, and valuation.


Work-in-progress

  • Currency Imbalances in Global Banks and the Dollar (with Anders M. Posselt and Mads M. Kjær)
  • Biodiversity and finansial flexibility (with Anil Kumar)