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2012年1月18日 星期三

(Chapter 16)Who can get from the course of the 「carry trade」interest? Small investors can benefit from them? When the「carry trade」blast, who is the victims?

1The definition of carry trade: Investors, first in the implementation of the national currencies of high interest rates, buying the country's currency, then the introduction of low-interest currency countries, sell the country's currency.

Investors buy higher yielding currencies, high interest money into domestic banks, which earn interest.

Investors in the sale process, which is earning interest spread, financial market speculation.


The so-called carry trade, first: put the low-interest currency, converted into high-yielding currencies, then implemented high interest rate currencies into local national banks or financial institutions, and finally, put the high interest rate currency, re-converted into low-interest money.

2Carry trade performance in two ways. The theoretical level, the explanation:


First, put low-interest currencies, direct conversion into high-yielding currencies, and put the money into high-interest bank or financial institution.


Second, to borrow money from low-interest currency countries, then, converted into high-interest money, and then, put all the money into the implementation of high-interest bank or financial institution.


3The profitability of the carry trade composition analysis:


In the foreign exchange market, the carry trade, in addition to earning two currencies, the difference between interest incomes to each other, the more you can also get two national currencies, as interest rate fluctuations, the additional revenue.

Examples are as follows:

USD / JPY at the 115.00 price that investor’s pay 115.00JPY. To buy $ 1USD.

投資者,把$ 1 USD存入美國銀行或金融機構,一年之後,假如USD/JPY的匯率上升到125.00JPY
Investors, put $ 1 USD into U.S. bank or financial institution, a year later, if the USD / JPY exchange rate to 125.00JPY.

At this time, the investor intends to end the carry trade.

At this time, if the U.S. interest rate is 5%, while Japan's zero interest rate, then, 1 * 5% = 0.05. In other words, investors will have a 1.05dollars.

由於一年後$1 USD可以兌換成$125.00JPY
As the year $ 1 USD can be exchanged for $ 125.00JPY;

0.05USD可以兌換成(0.05*125.00=6.2500)=6.2500 JPY
0.05USD can be converted into (0.05 * 125.00 = 6.2500) = 6.2500 JPY.

Investors, get the final total of 131.25JPY.

Investors initially cost is 115.00.

Profit is calculated as follows: (131.25-115.00 = 16.25JPY)

Investors earned interest is: 6.25JPY.

另外,投資者額外賺得的匯率的波幅是:$10 JPY
In addition, investors earn extra volatility of the exchange rate is: $ 10 JPY.

(4) Of the carry trade risk analysis:

However, this carry trade is a risk there.

So, where the carry trade risk there?


The above analysis, the process in the carry trade, investors gets profit of the two claims.

In terms of interest rates, volatility is not too much, because a country's banks, regardless of interest rates decline or increase the interest, are considered to be a long-time, so in a short period, the interest income decreased by factors not is significant.

The risk of carry trades, the main thing is: the high-yielding currencies, low interest rates than on currency exchange rates.

In the above examples that the example: USD / JPY exchange rate, if a year later fell to 105.00.

Finally, investors can redeem to the JPY is: (1 * 105.00 +0.05 * 105.00 = 105.00 +5.25 = 110.25JPY).

那麼,投資者對比115.00 JPY的成本,便會虧損了4.75JPY
So, investors compare the cost of 115.00JPY will also loss 4.75JPY.

With the above analysis, all of the carry trade risk, should have a general understanding of the.

So, what operation to carry trade, will it not risk?


Next topic:

Chapter 17what operation to carry trade, will it not risk?

Uncovered interest arbitrage Do you know  What does it means?
Covered interest arbitrageDo you know  What does it means?




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