Volker Oppitz / Milos Dr. Král / Hauke Haensel / Günter Hofbauer
Volker Oppitz / Günter Hofbauer
Volker Oppitz / Marian Zajko
The second chapter analyzes the literary sources of specialized databases as well as generally accessible lay search engines (the authors used Google) on historical sources of Carry Trade. The main part is then devoted to explanations of the historical nature of this phenomenon on the basis of existing economic theories. In the conclusion, the chapter determines which imperfections still remain and what sort of research and explanation will be therefore addressed in subsequent chapters.
Pursuant to the outcomes and conclusions from the analyses of the first and second chapter, the third chapter is focused on an explanation of the nature of Carry Trade, i.e., the methodological approach used to examine the issue, further it is directed at an analysis of existing definitions, their weakness points and shortcomings, based on which it specifically defines the phenomenon of Carry Trade as a principle and in parallel as a method (used by qualified experts of this principle following almost immediately the appearance of the principle in some segments of world and national financial markets). The last section of this chapter is aimed at present limiting of the use of the method and principle for both small and medium traders in financial markets.
The fourth chapter deals with the principle structure of the Carry Trade, thus its individual types completely different from each other and specific types peculiar to them (there are 4 primary types, each of them having subordinate subsystems and, in addition, there are various types of combinations created from all these subsystems regarding either the form of secondary products by means of modifications of the primary use of the Carry Trade method, or the form of
a various and often unable to be overlooked and de facto non-quantifiable Structured Investment Vehicle). The remaining two types of Carry Trade which are not specified in the second chapter are also clarified together with the definition of the nature and principle of their operation. Furthermore, the chapter features concrete examples from real environment of world and national financial markets. At the end of the chapter, despite this generic existence and despite the differences among them, it is still true that there is only one generalizing principle (described in Chap. 3) abstractedly common for all types of Carry Trade.
The fifth chapter is in the reasonably effective short form addressed at fundamental and technical analysis. These are methods that allow the experts in the field to take open trading positions in profitable use of the Carry Trade principle and also to conclude them with a profit in an optimal time perspective.
The attention in the sixth chapter is paid to mathematical-statistical evaluation of specific phenomenal forms in which the Carry Trade took part and sometimes constantly continues to participate. At first, this involves analyses of Slovak Koruna interest rates, one period of development of currency rate and Czech Koruna interest rates, thus the standard primary debt form of Carry Trade. Then the individual examples of Currency Carry Trade in currency pairs SKK/ATS, CZK/USD and DEM/USD and others are mathematically and statistically evaluated. The last section is intended on criticism of Fama’s Efficient Market Theory by contributing further evidence of its invalidity in the form of empirical evidence and its generalization.
The last seventh chapter lists, analyzes and evaluates major macro and microeconomic manifestations and consequences of the existence of Carry Trade. It also states the procedures enabling its use in the management of state finance (state foreign currency reserves and material reserves), municipalities, banks, insurance companies, firms, etc., and also the profitable management of private free financial assets (individual investors, traders, etc.).
Milos Dr. Král./ Chandrapala Pathiwarasam