Is the carry trade a 'pennies from heaven' magic trick, or does it tell us something fundamental about economic theory?: http://www.gresham.ac.uk/lectures-and-events/the-carry-trade-and-uncovered-interest-rate-parity
Basic economic theory tells us that borrowing money in a currency with low interest rates should not yield a profit compared to borrowing in a currency with high interest rates. This is because the interest rate differential should simply inform us about expected exchange rate depreciations. But, when it comes to the City, does the theory stand? Has it ever? Do funds make money because they ignore the theory?
The transcript and downloadable versions of the lecture are available from the Gresham College website: http://www.gresham.ac.uk/lectures-and-events/the-carry-trade-and-uncovered-interest-rate-parity
Gresham College has been giving free public lectures since 1597. This tradition continues today with all of our five or so public lectures a week being made available for free download from our website. There are currently over 1,800 lectures free to access or download from the website.
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