套利外汇交易-英文版交易指南.pptxVIP

Charlene Ting | Foo Chia Ying | Liu Shuang | Mervin Yeo | Thaddeus Low (G3) Carry Trade FNCE 102 Project Assignment 4Carry TradeSells a currency?with a lower interest rate and uses the funds to purchase?a different?currency yielding a higher interest rateAttempts to capture the difference between the ratesReceives a double pay-off from:Interest rate difference Purchased currency’s appreciation against the sold currencyCarry Trade RisksUncertainty of exchange ratesExchange rates may change such that investor has to pay back more expensive currency with less valuable currencyTransactions are generally done with a lot of leverageSmall movement in exchange rates can result in?huge losses unless hedged appropriatelyUncovered Interest Rate ParityAccording to uncovered interest rate parity, carry trades should not yield a predictable profit Difference in interest rates should equal the rate at which low-interest-rate currency rises against the high-interest-rate oneOthers argue that carry trade weakens borrowed currency because investors sell and convert it to other currenciesInvestigate if:Interest rate parity holds? Carry trades profitable?A Good Hedge for Stocks?Currencies provide portfolios with diversified sources of return if they share weak correlations to stock marketsInvestigateCurrency returns of 6 major currencies: GBP, AUD, CHF, USD, JPY, EURCorrelations against the Singapore stock market returns Which currency is a good hedge for Singapore stocksA Singaporean PerspectiveCarry TradesIs Carry Trade Profitable?Yes!Use Singapore 1 month BBA rates as benchmarkComparison against major currencies returns (1 month BBA rate + Exchange gains/losses)Short SGD; Long ForeignAustraliaEuroJapanSwiss FrancsUK USSharpe Ratio2.43311.0903-0.88500.01102.15780.9387Correlation: FX and BBAAustraliaEuroJapanSwiss FrancsUK USCorrelation between FX BBA Rates-0.3043-0.07710.0878-0.0122-0.1211-0.0046R-Squared0.09260.00590.00770.00010.01470.0000No carry trade but instead parity condit