Carry Trade Strategy

This one day course explores the carry trade strategy and looks at the theory behind the trade, how to design your portfolio in practice and risk management considerations. This is the only course that provides a comprehensive insight into the carry trade, delivered by world renowned expert in this field, Michael Rosenberg.

Available for in-house delivery. Call +44 (0)1483 573150.
Duration: One day (9.00am to 5.00pm)
Location: In-house
Trainer: Michael Rosenberg
Please contact us for a quotation

Course Outline


+ The Carry Trade — Unprofitable in Theory, But Profitable in Practice
+ Long-Run Profitability of FX Carry Trades — Evidence from G-10 & Emerging Market Currencies
+ Comparing the Performance of Fixed Income and FX Carry Trades

International Parity Conditions — Theory

+ Uncovered Interest Rate Parity
+ Forward Exchange Rates as Predictor of Future Spot Exchange Rates

Forward Rate Bias — What Accounts for the Failure of Uncovered Interest Rate Parity

+ Risk Premia
+ Expectational Errors
+ Crash Risk
+ Limits to Speculation

Macro Drivers of Long-Run Carry-Trade Performance

+ Relative Monetary Policies
+ Relative Risk Premia
+ Revision in Market Assessment of Long-Run Equilibrium Exchange Rates
+ Relative Inflation Expectations
+ Policy Credibility and Real Interest-Rate Persistence

Carry Trades and the Risk of Exchange-Rate Overshooting – 
Economic Consequences

+ Overvalued Exchange Rates
+ Weak Economic Performance Brought about by Persistently High Real Interest Rates
+ Capital Controls
+ Intervention
+ Carry Trade Unwinds
+ High Debt Burdens

Carry-Trade Return Analysis

+ Spot Return
+ Cumulative Positive(Negative) Carry
+ Carry Return
+ Carry/Risk Ratio
+ Distribution of Returns

Distribution of Carry-Trade Returns

+ Negative Skew – Crash Risk
+ Positive Skew – Picking of Nickels in Front of a Steamroller

Carry Trades and Risk Appetite

+ Guide to Risk Appetite Indices
+ Correlation of Carry-Trade Returns with Equity Market Returns
+ Calculating Currency Betas
+ Risk On / Risk Off and the Performance of Carry Trades

Tracking Carry-Trade Performance

+ Benchmark Indices
+ Structured Carry-Trade Notes/ETFs

FC Carry-Trade Analysis on Bloomberg


Carry-Trade Risk Management – Early Warning Systems

+ Valuation — Purchasing Power Parity & Long-Run Uncovered Interest Rate Parity
+ Volatility — FX Volatility & VIX Index
+ Momentum — Applying Trend-Following and Momentum-Based Models to Trends in Carry-Return Indices

Carry-Trade Risk Management – Strategy

+ Hedging Carry-Trade Risk with FX Options
+ Active Currency Overlay Strategies Using Valuation, Volatility, and Momentum Filters
+ Diversified Portfolio Approach to Carry-Trade Strategy

Portfolio Approach to Carry-Trade Strategy

+ G-10
+ EM
+ Global
+ Regional Blocs : Asia, Latin America, Europe

Carry Trades in History

+ Yen Carry Trade
+ ERM Crisis
+ Rising Dollar in 1980-85
+ Falling Dollar in 2000-04
+ Asian Crisis
+ Mexican Peso Crisis
+ Long-Run Outperformance of Aussie and Kiwi
+ Central European Household Foreign-Currency Borrowing

Performance of Carry Trades over the Past Five Years

+ Performance of Carry Trades During the Financial Crisis
+ Performance of Carry Trades in the Post-Crisis Period