Cash and carry arbitrage

I cant remember which SS this belongs to (perhaps missed it). Came across this in a mock. Please advice where to look this up.


somewhere between the beginning of volume 1 and the end of volume 6 of the CFAI books…

Hey, I think you’re referring to the classic carry trade where we borrow (cash) in low-yield currencies (i.e., USD, CHF, JPY) and invest (carry) in high-yield currencies (i.e., AUD, NZD) assuming uncovered interest rate parity (UCIP). If this violation of covered interest rate partiy (CIP) occurs, then we profit on the difference in interest rates (interest rate in high yield country less interest rate in low yield country). You can find more information on the carry trade in CFAI Volume 4 Reading 19 pages 34-38.