From carry trades to curvy trades

Volume: 43, Issue: 3, Pages: 758 - 780
Published: Nov 19, 2019
Abstract
Traditional carry trade strategies are based on differences in short‐term interest rates, neglecting any other information embedded in yield curves. We derive return distributions of currency portfolios, where the signals to buy and sell currencies are based on summary measures of the yield curve. We find that a strategy based on the relative curvature factor, the curvy trade, yields higher Sharpe ratios and a smaller return skewness than...
Paper Details
Title
From carry trades to curvy trades
Published Date
Nov 19, 2019
Volume
43
Issue
3
Pages
758 - 780
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