Enhanced Carry Trades - A new Approach in Asset Management and Trading
Project Description
Standard carry trades sell low-yield currencies and buy high-yield currencies. The trading idea is to capture the interest rate differential between currencies. The unique selection criterion of carry trades is the corresponding yield of various currencies.
This cumulative dissertation discusses a new approach of carry trades. The approach of this dissertation expands the selection criterion by foreign exchange (FX) variation. This extension is necessary, as the FX variation is the main source of risk and the FX dynamic can ruin the profitability. Additionally, the dissertation project discusses the diversification effect of carry trades for an institutional investor and the predictability of currency returns.
The aim of this dissertation is to introduce a new carry trade strategy, which is more robust against FX risk, and to show the benefits of this carry trade strategy for an institutional investor.
This cumulative dissertation discusses a new approach of carry trades. The approach of this dissertation expands the selection criterion by foreign exchange (FX) variation. This extension is necessary, as the FX variation is the main source of risk and the FX dynamic can ruin the profitability. Additionally, the dissertation project discusses the diversification effect of carry trades for an institutional investor and the predictability of currency returns.
The aim of this dissertation is to introduce a new carry trade strategy, which is more robust against FX risk, and to show the benefits of this carry trade strategy for an institutional investor.
