Uncovered IRP Carry Trade Return

Estimate carry trade expected return from the interest rate differential between a high-yield and low-yield currency, acknowledging that uncovered interest rate parity predicts this gain is offset by depreciation on average

Each component has a specific meaning:

• Interest rate differential between a high-yield — The interest rate differential between a high-yield recorded for the scenario being assessed.
• Low-yield currency — The low-yield currency recorded for the scenario being assessed.
• Acknowledging that uncovered interest rate parity predicts this gain is offset by depreciation on average — The acknowledging that uncovered interest rate parity predicts this gain is offset by depreciation on average recorded for the scenario being assessed.

Note: Interpret the carry trade return result against the thresholds and context described above.

Enter the interest rate differential between a high-yield, low-yield currency, acknowledging that uncovered interest rate parity predicts this gain is offset by depreciation on average for the scenario you are assessing. Estimate carry trade expected return from the interest rate differential between a high-yield and low-yield currency, acknowledging that uncovered interest rate parity predicts this gain is offset by depreciation on average. Use the carry trade return result to inform your calculation.