NO.PZ202212300200001701
问题如下：
BC Fundos de Pensao (BC),
manages pension funds for numerous local companies and has currency exposure to
the USD, the EUR, and the GBP. BC wants Sabanai to provide guidance on using
active currency management strategies for the portfolios they manage. Peixaria
has been assigned this task and has collected information on one-year yield
levels in the United States, United Kingdom, and Eurozone, as well as one-year
implied volatility for various currency pairs extracted from option pricing
models. This information is provided in Exhibit 2.
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.
The carry trade is to lending in the low funding rate country and invest in the high yield country. So we can lend in US and invest in UK. The volatility of currency pair of USD/GBP would be low in order to implement the carry trade.
