A carry trade is typically based on borrowing at a low interest rate and investing in an asset that provides a higher rate of return.
Questions tagged [carry-trade]
7 questions
61
votes
3 answers
How can I invest in country A to take advantage of their great interest rate while I live in country B?
If I live in the US, for example, where current interest rates are practically nil, how can I take advantage of the fact that interest rates in Australia are almost 5%?
Michael Pryor
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29
votes
8 answers
What stops you from using fixed income in developing countries?
I was recently visiting a developing country and noticed that their interest rates are very high — ~15% with government bonds promising ~13% annually. I was just thinking, if the bid ask spread for that currency with the USD is B/A respectively,…
AspiringMat
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Why does the currency carry trade work?
I understand the carry trade mechanism, but I wonder why it works, or why it doesn't work.
Each currency has an interest rate associated with it. The Yen (JPY) has historically had a very low interest rate, while the Australian Dollar (AUD) has one…
Joseph Tanenbaum
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Get interest on $100K by spending only $2K using FOREX rollovers?
Is there any way to combine FOREX instruments to receive interest on
$100K while spending only $2K?
If I buy 100K USDCAD (for example), I only need $2K margin. Every
night, I'm charged the difference in interest rates on the entire
$100K. This…
user1731
3
votes
1 answer
Understanding bond margin, carry trade fundamentals
US Treasuries that have less than 6 months till maturity allow for 100x leverage, as the regulatory requirement is to put 1% of the market value down for each bond.
So a $1,000,000 account could hold $100,000,000 of 3 month bonds and earn 1.06% a…
CQM
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Carry trading using forward contracts
I am curious as to how someone performs a carry trade using forward contracts.
I've read that you go long on the currency that has the higher interest rate but this confuses me. In particular, I've read you take
an "uncovered forward position in…
qp212223
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0
votes
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Can a non-Turk borrow Turkish lira?
Turkey is currently on the cusp of a hyperinflation apparently triggered by its president's policy of maintaining nominal interest rates far below inflation. Thus Turkish banks are currently giving loans at a real interest rate of perhaps -16%,…
Kevin Carlson
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