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The Credit Crisis And The Carry Trade
Broadly speaking, the term "carry trade" means borrowing at a low interest rate and investing in an asset that provides a higher rate of return. For example, assume that you can borrow ,000 at an interest rate of 3% for one year; further assume that you invest the borrowed proceeds in a certificate of deposit that pays 6% for one year. After a year, your carry trade has earned you 0, or the difference between the return on Read More...
The Eurozone Crisis And AAA Ratings
Europe is in trouble. This is nothing new, of course, as headlines have constantly reminded us of the threats facing the euro, of the profligacy of many European governments and of the forces trying to tear the eurozone apart, battling those trying to keep it together. Europe is in trouble because so many economic and political factors seem to be on an unavoidable collision course, like a ship bearing down on a giant iceberg. No one i Read More...
Making Sense Of The EUR/CHF Relationship
If you're interested in getting into the forex market, there is one relationship that you must be aware of before you even start trading: the relationship between the euro and the Swiss franc currency pairs, a correlation too strong to be ignored.
In the article Using Currency Correlations To Your Advantage, we see that the correlation between these two currency pairs can be upwards of negative 95%. This is known as an invers Read More...