NO.PZ202212300200001701
问题如下:
Based on the information in Exhibit 2, determine a
carry trade for BC. Justify your response.
选项:
解释:
Correct Answer:
Implement a carry
trade for BC by borrowing in USD and invest in GBP.
The spread in
yields is widest between the United Kingdom and the United States, and the
USD/GBP currency pair has the lowest implied volatility, which is better for a
carry trade.
UK interest rates
are the highest, so the GBP would be an appropriate currency to invest, not to
borrow. US interest rates are the lowest, so the USD would be an appropriate
funding currency, not an investment currency.
The Eurozone has
higher one-year yield levels compared to the US, so this would not be the
appropriate funding currency. Furthermore, one-year implied volatility for the
Eurozone is the highest, which does not benefit a carry trade.
BC should implement a carry trade by borrowing low interest yield in United States and investing in high interest yield in United Kingdom since this currency pair has widest yield spread.What’s more, USD/EUR has lowest implied volatility, which means highest stability.