The Effect of Exchange Rate Changes on Hedge Funds' Net Asset Value

Essay specific features

 

Issue:

Miscellaneous

 

Written by:

Kevin T

 

Date added:

August 1, 2014

 

Level:

University

 

Grade:

A

 

No of pages / words:

10 / 2764

 

Was viewed:

6241 times

 

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Essay content:

According to this parity condition, one can't, on average, profit from speculating on this interest rate differential. Puzzling however, investors seem to exploit the interest rate differential substantially, the so called carry trade. There is no generally accepted definition of what constitutes a carry trade...
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There is no generally accepted definition of what constitutes a carry trade. We define a carry trade as taking a short position in a low-interest-rate currency (funding currency) and a long position in a high(er)-interest-rate currency (target currency). Although the UIP tells us that carry trades yield no predictable profits...
displayed 300 characters

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