In this episode, Niels and Rob is joined by Kevin Coldiron, co-author of the book “The Rise of Carry” and lecturer in Asset Management at UC Berkeley, to discuss the use of carry trading as a trading strategy, how it relates to volatility and risk, how carry trading creates market feedback effects, and how that is distinct from feedback created by other strategies, how it can play a role in financial bubbles, whether we are currently in a carry regime or transitioning away from it and what comes after a carry regime.
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In This Episode, we'll discuss:
- The increasing popularity of carry trading and its role in the global economy
- The risk and volatility of carry trading, and how it can play a role in financial bubbles
- How carry trading creates market feedback effects, and how that is distinct from feedback created by other strategies
- The role of liquidity within the carry world
- The future of carry
Follow Kevin Coldiron's work:
00:00 – Intro
02:25 – Introduction to Kevin
05:53 – Background on the co-authors of Kevin’s book
09:43 – Definition of carry trading with examples
13:56 – Volatility vs. risk
23:11 – The role of Volatility in investing
28:27 – Carry trade supressing volatility
35:55 – Does carry trades play a role in financial bubbles?
41:01 – The current carry regime?
43:38 – Carry in macroeconomics
52:48 – What comes after a carry regime?
01:05:44 – Thanks for listening