On December 2, 2024, at 14:00 pm, the 37th Forum on Digital Technology and Economic Finance Frontiers was successfully held. The theme of the lecture was "The  Risk  and  Return  of Cryptocurrency Carry Trade", and the guest speaker was Professor Lei Lu from Asbo School of Business, University of Manitoba, Canada.The lecture was chaired by Professor Yongbin Lv, Vice Dean of the Finance School and Deputy Director of the Innovation and Talent Base for Digital Technology and Finance. More than 50 teachers and students from the School of Finance participated in this lecture.

First, Professor Yongbin Lv, on behalf of the teachers and students of the School of Finance, extended a warm welcome to Professor Lei Lu and briefly introduced Professor Lei Lu and his research directions in related fields.

At the beginning of the lecture, Professor Lei Lu showed how to make risk-free profit by taking advantage of the interest rate difference between different currencies through a case of currency carry trade. Professor Lei Lu then discussed the theory of interest rate parity (UIP) and its limitations in reality, and pointed out that the positive return of carry trade in the fiat currency market is related to a variety of risk factors, including global stock market volatility, downside risk and foreign exchange volatility risk.

Subsequently, Professor Lei Lu pointed out that the cryptocurrency carry trade across sectors was able to generate an annualized return of 43.4% and a Sharpe ratio of 0.74, indicating that the cryptocurrency carry trade performed well during the economic downturn. This is mainly because, in contrast to fiat currency carry trades, cryptocurrency carry trades are not affected by economic fundamentals and monetary policies.

In the empirical analysis section, Professor Lei Lu used the cryptocurrency interest rate data provided by Bitfinex to study the predictability of cryptocurrency excess returns through regression analysis, and constructed a cross-sectional carry trading strategy. Based on the results of the empirical analysis, Professor Lei Lu pointed out that the returns of cryptocurrency carry trading cannot be fully explained by risk factors such as market risk, liquidity risk, downside risk and platform crash risk, but are related to the stock market volatility index (VIX).

Finally, Professor Lei Lu gave a brief summary of the content of the lecture, and patiently answered the questions raised by the teachers and students present. All the teachers and students present at the lecture said they benefited a lot. At this point, the lecture was successfully concluded.

Speaker Introduction

Lei Lu, Professor of Finance and Bryce Douglas Endowed Chair in Finance at the Asper School of Business, University of Manitoba, Canada, and Ph.D. supervisor. He graduated from McGill University in Canada in 2007 with a Ph.D. in Finance. He has taught at the School of Finance, Shanghai University of Finance and Economics (2007-2011) and the Guanghua School of Management, Peking University (2011-2016). Professor Lu's research interests include asset pricing (both theoretical and empirical), investor behavior, international finance, and Chinese financial markets. His research findings have been published in nearly 40 finance and economics journals, including Management Science, Journal of Financial and Quantitative Analysis, Journal of Corporate Finance, Journal of Financial Markets, Financial Management, Journal of Futures Markets, Journal of Economic Dynamics and Control, Economic Theory, Chinese Journal of Management Science, and Journal of Financial Research. Professor Lu has hosted research projects funded by the Social Sciences and Humanities Research Council of Canada, the General Program of the National Natural Science Foundation of China, the Pujiang Talent Plan Project of Shanghai, and the China Financial Futures Exchange. He currently serves as the Associate Editor of Accounting and Finance, China Finance Review International, Financial Review, and Journal of Management Science and Engineering.

Frontier Forum for Digital Technology and Finance introduction

Recent years have witnessed a dramatic acceleration in a digital revolution in economic sectors and a rapid adoption of the new generation of information technologies, such as artificial intelligence, blockchain, cloud computing, big data, etc. These technologies effectively set off the digital economy. It has become a key driving force in creating global economic growth, improving the modernization level of governance capabilities, and promoting high-quality economic development in China. In particular, digital finance is the most important part of the digital economy. To explore the development direction of the cross-integration of digital technology and finance, the Innovation and Talent Base for Digital Technology and Finance is hosting the “Frontier Forum for Digital Technology and Finance”, in collaboration with the School of Finance, Wenlan School of Business, Economics School, School of Information and Safety Engineering, School of Statistics and Mathematics, School of Public Finance and Taxation of Zhongnan University of Economics and Law (ZUEL). This lecture series will invite the well-known scholars at home and abroad in digital technology, digital economy, digital finance, and other related fields as guest speakers, providing an open and cutting-edge academic exchange platform for interdisciplinary research on digital technology and finance.