Currency Carry : How do Banks do it??
- Thread starter Remiraz
- Start date
according to one guy on the big O forum, there is no hedge for carry trades. else it will be an arbitrage opportunity.
also, i read somewhere one of the ways bank do carry trades is to short the spot and long the 90 days forward to earn the interest difference.
now...where can we find the 90 days forward thingy?
also, i read somewhere one of the ways bank do carry trades is to short the spot and long the 90 days forward to earn the interest difference.
now...where can we find the 90 days forward thingy?
Quote from Remiraz:
according to one guy on the big O forum, there is no hedge for carry trades. else it will be an arbitrage opportunity.
also, i read somewhere one of the ways bank do carry trades is to short the spot and long the 90 days forward to earn the interest difference.
now...where can we find the 90 days forward thingy?
It's not that simple - the interest that would be accumulated in the next 90 days would already be priced into the forward
Yeah that would be a spread. You could only profit if the market had miscalculated the interested rate for the 90 days.
Runningbear