Currency carry trades in Latin America / Julio A. Santaella.

Executive summary, 1 -- 1. Introduction, 2 -- II. Carry trade strategies, 3 -- A. Three types of currency carry trade, 3 -- Box 1: Two interest parity conditions relevant for carry trades, 5 -- 1. Carry trade strategy with acquisition of domestic assets, 6 -- 2. Carry trade using (deliverable) FX swaps, 6 -- 3. Currency carry trade strategies using non-deliverable forwards or futures, 7 -- Box 2: Alternative carry trade or related strategies, 9 -- B. Arbitrage or other trades, 10 -- C. Portfolio carry trades, 12 -- III. Market characteristics relevant for carry trades, 12 -- A. Foreign investors, counterparties and positions, 12 -- B. Maturities, hedging, leverage and funding currencies, 13 -- C. Funding currencies in Latin America, 14 -- D. Regulations and policies affecting carry trades, 15 -- IV. Investor perspectives: has the importance of carry trades declined?, 16 -- V. Indicators of carry trade activity, 20 -- A. Indicators of incentives for carry trades (returns and risks), 20 -- B. Indicators of arbitrage opportunities and market Iiquidity, 21 -- C. Indicators of position-taking, 22 -- D. Additional investor perspectives on indicators of carry trade activity, 24 -- VI. Conclusion: what have we learned about carry trades in Latin America?, 25 -- Annex I Some research on carry trades, 27 -- Annex II Positioning indicators, 29 -- Annex III. Graphs, 30 -- References, 38 -- Glossary of selected terms used in this report, 41 -- Acronyms, abbreviations and other terms, 41 -- CCA/CGDO Study Group on Carry Trades, 42.