Question #17
Reading: Reading 5 Currency Exchange Rates - Understanding Equilibrium Value
PDF File: Reading 5 Currency Exchange Rates - Understanding Equilibrium Value.pdf
Page: 7
Status: Unattempted
Correct Answer: A
Question
Tim Kramer is assessing the risks of the carry trade for his firm. He obtains a distribution of expected returns for the carry trade. This distribution is most likely to exhibit:
Answer Choices:
A. fat tails and a negative skew
B. a normal distribution
C. fat tails and a positive skew
Explanation
The distribution of carry trade returns is characterized by negative skewness and fat tails.