Risk Premia
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Carry Strategies Across Asset Classes: Mathematical Foundations
- Fabio Capela
- Carry trading , Quantitative finance , Asset pricing , Risk premia , Cross asset strategies , Mathematical finance , Alternative beta , Systematic trading
Imagine borrowing money at 1% and lending it at 5%. The 4% difference seems like an obvious profit, yet financial theory suggests this opportunity shouldn’t exist. Markets should quickly eliminate such discrepancies through arbitrage. But across currencies, bonds, and stocks, these “carry” opportunities persist with remarkable consistency.
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