How does the intramarket carry trade work for receive fix and pay float interest rate swap in an upward sloping yield curve?
How do you make money?
And then in an inter market carry trade, why do you pay fixed, receive float in flatter market, and rec fix, pay float in steeper market?
You buy 10-year bonds and issue 6-month bonds.
It seems this inter-market chapter is throwing a lot of candidates off.
Magician, may I know whether you think CFAI or Scheweser does a better job explaining the concepts of this particular topic?
I have no idea how good a job Schweser does, because I haven’t seen their materials.
CFA Institute does a pretty good job, but there are a million moving parts, so it’s really complicated even with the best explanation.
Some anonymous person hit the highlights here: https://www.reddit.com/r/CFA/comments/blyjo8/liii_intermarket_curve_strategies_the_definitive/
Thanks! Let’s hope it will just be an MC question.
I’m confused as to how you make money on this? The swaps legs are of equal value at the time of initiation. If the yield curve remains stable, shouldn’t the net effect be 0?