NEW OPPORTUNITIES IN CURRENCY CARRY TRADE

Abstract

Most commonly used carry trade strategies involve only a few dominant currencies around the world. The purpose of this thesis is to explore the possibilities of carry trade strategies in the emerging markets with less liquid and highly volatile currencies. By studying the different natures of emerging market currencies and their correlations to the market volatility, I plan to develop new robust carry trade strategies that can utilize the emerging market currencies as well as developed market currencies into unique carry trade portfolios. I believe that the correlations between volatility indices and trends in emerging markets’ interest rates as well as their exchange rates may shed light on interesting possibilities in the field of currency carry trade.