Currency Risk Management

[jeffsick]

Hi Guys
I have not logged in here for the session. I am just keeping my head down as this is my third attemp at Level 3.
I need some help.
Book 5 pg 246 to 247. The example on active strategies. I do not understand how they came to the answer for the
first part. All the other parts were straight forward.
Please explain

 

[cpk123]

look at the interest rate differential between the currency pairs - PLN->CHF is the highest
Also look at the implied volatility of the pairs - it is the lowest for that pair.
For a carry trade - you buy high, sell low. That is basically the interest rate differential between the currency pairs should be the highest.

 

[dpkota71]

Hi Jeffsick
This is aninteresting question.
By referring to ‘Book 5 pg 246 to 24’ are you referring to schweser L3 book 5?