Every banking business day starting January 1st, 2005, through January 1st, 2021: (i) Bid and asked exchange rates (spot and 1- and 6-month forwards) for two currency pairs: USD/GBP (Euro); JPY/USD (Yen). (ii) The 1- and 6-month interbank asked interest rates (LIBOR) for the relevant three currencies: USD, GBP and JPY. (iii) The 1-month and 6-month interbank bid and asked interest rates (LIBID) for the following three currencies: USD, GBP and JPY (see note below on how to compute them if you cant find)

Question 2: Yen carry trades (40 points) An investment advisor claims that, over this period, he made a lot of money for various investors by means of Yen carry trades, using the yen as the funding currency and the US dollar as the target currency. He proposes to do the same for you now, using highly leveraged positions. Specifically, he proposes to execute carry trades, using 1-month or 6-month loans that he would then roll over. He claims that he is able to obtain interbank rates for his transactions.

Please evaluate his claims of past success. To do so, you may assume that he is indeed able to trade at interbank rates. Suggestion: you may wish to proceed by answering the following two questions: a. Over the period, could he have made money from carry trades, using the yen as the funding currency (borrowing at LIBOR) and the US dollar as the target currency (depositing at USD LIBID or some other measure of the USD interbank deposit rate)? Hint: Assume that he would have been continuously doing carry trades during the this period, using 1-month or 6-month loans that you roll over. Describe the instruments he would have used to implement the carry trades, the roll-over strategy, gains/losses, etc.