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Carry trades and volatility risk
[Le « carry trade » au risque de la volatilité]

Author

Listed:
  • Xavier Denis
  • Tamaki Descombes
  • Henri de La Guéronnière

Abstract

Carry trades exploit interest rate differentials between currencies by borrowing at low interest rates in certain currencies and using the proceeds to invest in currencies offering higher interest rates. However, the gains from interest rate differentials can be wiped out by the associated currency volatility. Since the summer of 2024, with the unwinding of positions and weakness of the US dollar, it has been tricky to find the right currency pair to bet on. Les opérations de carry trade profitent de l’écart de taux d’intérêt entre devises, en empruntant à des taux bas dans certaines devises pour financer des investissements en d’autres devises offrant des taux d’intérêt plus élevés. Cependant, le risque de change associé peut supprimer le gain issu des différentiels de taux d’intérêt. Depuis l’été 2024, entre débouclage de positions et faiblesse du dollar, parier sur les bonnes devises n’a pas été chose aisée.

Suggested Citation

  • Xavier Denis & Tamaki Descombes & Henri de La Guéronnière, 2026. "Carry trades and volatility risk [Le « carry trade » au risque de la volatilité]," Eco Notepad 433, Banque de France.
    • Handle: RePEc:bfr:econot:433
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    File URL: https://www.banque-france.fr/fr/publications-et-statistiques/publications/le-carry-trade-au-risque-de-la-volatilite
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