Hi guys… I am having serious problem with the exercises.. teorically I understand that you borrow in low yield currency, then buy high yield currency, invest in high yield currency and the sell it and buying back your kow yield currency and pays the interest. However when I doind the exercise I don’t get it..
Someone could explain me this exercise please.
All in return in Carry trade in JPY
1Y Libor JPY: 0.15%
1Y Libor EUR: 1.4%
Spot JPY/EUR 127.629/ 127.932
1Y Spot JPY/EUR 129.963
What I am doing is converting this Fx to EUR/JPY using bid=1/offer and offer=1/bid, after that I “buy” EUR using my new offer then multiplied by 1.014 and divided by “selling” EUR by the spot rate of 1Y.. finally I rest 0.15%… What I am doing wrong? or how can I solve this type of exercise easily?
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