Hey i was wondering if there was a way to back test the carry trade strategy on quantopian.
Would be for a university assignment.
Many thanks,
REgards,
Andrew
carry trade
Welcome to Quantopian.
I searched our forums, and it looks like an example was built by a community member.
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Correct me if I am wrong, but carry trades involve borrowing (selling short) currency in a low interest rate market and buying currency with the proceeds in a high interest rate market capturing the difference. I've also seen interest rate derivative strategies that use futures and the cash markets in sovereign debt employing macro-economic indicators that are highly correlated with the carry trade. Sometimes futures basis trading is also called a carry trade. Since all of these involve forward exchange and futures contracts along with macro data I don't see how these type of trades can be simulated on Quantopian.
Dan, the post you pointed to references a dividend capture strategy. Maybe I'm mistaken and the OP meant the Jim Carrey trade or perhaps the disastrous Jim Carey trade, but how is this dividend strategy a carry trade?
What am I missing?
you borrow the currency with low rate and you buy one with the high interest rate,you make the spread with the high interest when you pay back the low interest one;did some back test with data from bloomberg,from the year 2000(because of the euro) all the way to 2011,all was nice until 2007,it all stop working,now we are zero bound in the g12 currencies so no carry trade.
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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.
In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.