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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: macavity who wrote (41216)	11/10/2003 9:04:02 PM
From: Mark Adams	Read Replies (1) \| Respond to of 74559

Thanks. Eventually I would get there, but for some reason I keep downloading 5x more info than I can possibly digest. And I must keep some time open to ponder. {edit} I would think that if the cost of hedging FX droped below that of the yield differential, then it would be a no brainer to leverage up a 'risk free' hedged return. This would suggest that the cost of hedging would cap the max yield differential you would see. Understanding that yield plays into the equations, as does volatility. While yields might be somewhat continuous, it would be sudden changes in vol that would likely hand traders their heads. So an expansion of the volatility of yields in either currency, and/or an expansion of volatility in exchange rates, would increase the cost of hedging and increase the yield disparities the system would tolerate.