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VIDEOMarket Lingo: Carry Trade
Carry trades involve borrowing money at low interest rates and investing the proceeds in higher perceived rates of return.
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Expanding on the Minyanville dictionary to explain the jargon frequently used by Minyanville professors on the Buzz.
MV professors occasionally refer to carry trades. A carry trade involves borrowing money at low interest rates and investing the proceeds in projects perceived to return more than the cost of 'carrying' the borrowed funds. When you think about it, carry trades are central to modern financial systems.
Problems can arise, however, if the risk of the carry trade is misjudged and the trade goes against leveraged participants. Moreover, central banks might encourage excessive speculation by offering low cost funds to carry traders.
Look up other terms at the Market Lingo Library
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