Carry-To-Risk Ratio como medida de Carry Trade

Sergio A. Díaz, Paula A. González and Claudia A. Sotz

Economic Statistics Series from Central Bank of Chile

Abstract: Wide interest rate differentials between economies may generate attractive investment opportunities. However, these operations could cause major disruptions in foreign exchange markets, such as excessive volatility in the exchange rate due to overexposure to speculative flows. The investment strategy by which an agent takes advantage of interest rate differentials of two economies is known as carry trade. This strategy assumes the absence of uncovered parity. This document describes this investment strategy as well as a measure called carry-to-risk ratio that allows identifying opportunities in which this strategy is more attractive to investors. Finally, evidence is presented for the Chilean case, its implications for the formal exchange market (FEM) and the eventual impact in the movement of the Chilean peso.

Date: 2013-02
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.bcentral.cl/estudios/estudios-economicos-estadisticos/pdf/see94.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.bcentral.cl/estudios/estudios-economicos-estadisticos/pdf/see94.pdf [302 Object Moved]--> https://www.bcentral.cl/estudios/estudios-economicos-estadisticos/pdf/see94.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchee:94

Access Statistics for this paper

More papers in Economic Statistics Series from Central Bank of Chile Contact information at EDIRC.
Bibliographic data for series maintained by Alvaro Castillo ().