About This Video
Foreign exchange carry trade, which involves buying high yielding currencies against low yielding currencies, has a successful track record that goes back more than 25 years. However, the recent shift in the world’s financial market towards risk aversion is not only threatening the survival of many carry traders but also questioning the logic of this type of strategy. In this presentation, we argue that carry traders can increase their risk adjusted returns by tracking the levels of forex volatility, options risk reversals and interest rate expectations.