Carry Trade

Trading Basics

Carry Trade

A forex trading strategy of borrowing funds in a low-interest rate currency and buying assets in higher yielding currency.

For years this was selling Yen to buy Dollars.

Other Trading Basics

ABS

Asset-backed securities.

These are securities backed by assets, like mortgages, which are claimable if the creditor defaults.

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Commercial Paper

How big companies finance short-term cash flow.

Like bonds but without the coupon, instead, the APR is determined by the discount the agreements are entered into and the length of time to repayment.

For example, a blue chip company might borrow $9.95m dollars today and repay $10m in a month’s time.

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