An examination of G10 carry trade during non-crisis and crisis period (2007-2009)

Authors

Charles Kwame Armah Danso, University of Texas-Pan American

Date of Award

8-2014

Document Type

Thesis

Degree Name

Master of Business Administration (MBA)

Department

Finance

First Advisor

Dr. Thanh Ngo

Second Advisor

Dr. Diego Escobari

Third Advisor

Dr. Monika Rabarison

Abstract

Carry trading is a form of currency trading in which an investor buys assets in a higher interest yielding currency by borrowing in a low interest yielding currency without hedging for exchange risk. I seek to compare and contrast the performance of carry trade strategy before and after the financial crisis (2007-2009). I also compare and contrast how the carry trade strategy and covered interest rate arbitrage fare in different periods. Carry traders do not hedge their position using forward rates whereas covered interest rate arbitrageurs do hedge their position using forward rates. A comparison of the two trading strategies in periods of non-crisis and crisis can help review if forward rates are effective measures reflective of investors’ expectation in periods of non-crisis as opposed to period of crisis.

Comments

Copyright 2014 Charles Kwame Armah Danso. All Rights Reserved.

https://www.proquest.com/dissertations-theses/examination-g10-carry-trade-during-non-crisis/docview/1629825768/se-2

Granting Institution

University of Texas-Pan American