Trade in Carry

USA BD

3% 9% Borrowing Rate

1% - 6% Deposit Rate

Carry trade generates arbitrage profit.

It solely takes into account location and refers to sure shot profits.

No further earnings are possible thanks to arbitrage profit.

Convert $100 to BDT 8000 as a first step.

Step 2: Make a BDT 8000 deposit to receive a BDT 8480 refund.

Step 3: Reverse the BDT 8480 into USD.

Step 4: Repay the USD borrowing interest and keep the remaining funds as profit.

How do you calculate the breakeven point for arbitrage and speculation profit? CURVE OF
DIFFERENCE, BE SURE TO DRAW.

Hold the currency that increases in value.

Example: In 2018, it was anticipated that the USD would increase by year's end. Due to this,
foreign investors liquidated all of their equities and kept the proceeds in USD until the year's
conclusion.

Money is constantly floating.

When a forward contract is signed, the interest rate is fixed and arbitrage is possible.

For forex trading, two effects are possible:

1. The Effect of Interest Rate Differencing

2. Effect of Exchange Rate Change

Spot exchange rate denotes the going rate of exchange.

To maximise their profits from international trade, MNCs must routinely take into account the
currency rates with various nations.

money market insurance

Hedging is the process of limiting or neutralising risk by securing against change or fluctuation.
Profit maximisation is not the same as hedging. It can be advantageous in the long run and
during the planning process. Three methods of hedging exist:

Lead Payment 1.

2. Currency Hedging

Third-Party Contract

Hedging can come with opportunity costs, though.

There are three categories of derivative contracts: currency, financial security, and commodities.

What does "Effective Exchange Rate" and "Effective Forward Rate" mean?