Market Structure

Psychological challenges of pure speculation

How to identify potential carry opportunities

They provide liquidity to the market

Used by hedge funds and institutions

Hedging costs vs. unhedged risk trade-off

Options for defined-risk strategies

Swaps for institutional portfolio management

Used for hedging and speculative strategies

Swaps hedge long-term project cashflows

Carry trades for interest-seeking investors

Call option gives right to buy currency

No counterparty risk from clearinghouse

Non-standardized compared to futures

Carry trade works in stable conditions

Common speculative strategies explained

Currency Quotes