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Which of the following statement is FALSE? Funding currency in a carry trade is frequently a volatile currency e . g . , Saudi riyal
Which of the following statement is FALSE? Funding currency in a carry trade is frequently a volatile currency eg Saudi riyal that is sensitive to oil price movements. Carry trade has paid off on average because historically interest rate differences haven't reflected actual subsequent exchange rate movements. One hallmark pattern of carry trade is steady rise in small profits and then sudden crash. Currency risk in a carry trade is seldom hedged because hedging would either impose an additional cost or negate the positive interest rate differential if currency forwards are used. The carry trade is profitable as long as the interest rate differential is greater than the appreciation of the currency with a low interest rate against the currency with a high interest rate.
Which of the following statement is FALSE?
Funding currency in a carry trade is frequently a volatile currency eg Saudi riyal that is sensitive to oil price movements.
Carry trade has paid off on average because historically interest rate differences haven't reflected actual subsequent exchange rate movements.
One hallmark pattern of carry trade is steady rise in small profits and then sudden crash.
Currency risk in a carry trade is seldom hedged because hedging would either impose an additional cost or negate the positive interest rate differential if currency forwards are used.
The carry trade is profitable as long as the interest rate differential is greater than the appreciation of the currency with a low interest rate against the currency with a high interest rate.
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