Carry trade: μια εφαρμογή στο ελβετικό φράγκο

Abstract

The profitability and implementation of Carry Trade is the goal of this study. It is an investment strategy, which is based on the profit that results from the difference in interest rates of two national currencies. In this study, the Swiss franc was chosen as a low-interest currency to be borrowed by an investor, who would later invest this capital in the form of a deposit in another currency with a higher interest rate, which in our study is the Turkish lira. This process is profitable for the investor, as he repays the loan at a low cost due to the low interest rate and expects to receive from his investment a higher return than the high interest rate. Exchange rates also play a key role in the profitability of the strategy, which if properly predicted by investors, the final return on investment will be positive. The study collected data and examined their yields from 2008 to 2020. The comparative advantage of this is that it is based on the choice of the specific currency pair, as the majority of the literature examines common currency pairs such as USD / JPY, NZD / JPY and EUR / USD. The choice of the Swiss franc as the financing currency is of particular importance due to the efforts of the Swiss central bank to prevent the appreciation of the franc and the central bank of Turkey to prevent the devaluation of the pound. This paper examines the implementation of Carry Trade between currencies that investors would be reluctant to choose.