tag:blogger.com,1999:blog-7905515.post4245856560650852488..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: What is the Carry Trade?Eric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7905515.post-69518692139262761032010-10-05T14:50:39.709-05:002010-10-05T14:50:39.709-05:00I don't know. I think of the carry trade as o...I don't know. I think of the carry trade as one of those classic "picking up pennies in front of a steam roller" strategies.<br /><br />I remember a buddy and me looking at Icelandic interest rates on before their economy melted down. Looked like a free lunch, but it wasn't.<br /><br />I think what most measures of risk like std deviation miss is the risk of a dramatic reversal due to a massive revaluation. More often than not these events are not observed in the data but exist only in the imagination of traders. They know they are possible even though they have not happened YET.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-73492353055020499372010-10-01T04:28:47.981-05:002010-10-01T04:28:47.981-05:00Look here:
http://papers.ssrn.com/sol3/papers.cfm...Look here:<br /><br />http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1342968<br /><br />or here:<br /><br />http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1139447<br /><br /><br />for risk-based explanations.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-67970261172391346432010-09-30T18:11:10.411-05:002010-09-30T18:11:10.411-05:00If hedge funds continue buying the high-interest-r...If hedge funds continue buying the high-interest-rate currency (in order to receive the higher interest rate), then why is is surprising that the currency appreciates in value? Am I totally missing something?<br /><br />And when the high-interest-rate country lowers rates, does this cause the hedge funds to unwind the trade by selling the high-interest-rate currency, thus causing it to depreciate?colemanhttps://www.blogger.com/profile/07564530303451289242noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-41427658850586923982010-09-30T15:49:16.505-05:002010-09-30T15:49:16.505-05:00Can it be explained by the government policy of pe...Can it be explained by the government policy of pegging short term rates?Anonymousnoreply@blogger.com