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The Authors Describe an Application of Uncovered Interest Arbitrage (UIA)

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Essay

The authors describe an application of uncovered interest arbitrage (UIA) known as "yen carry trade." Define UIA and describe the example of yen carry trade. Why would an investor engage in the practice of yen carry trade and is there any risk of loss or lesser profit from this investment strategy?


Definitions:

Manage the Business

The process of overseeing and making decisions about the operations, finances, and strategy of a business to ensure its success and sustainability.

Three Partners

Refers to a business structure where three individuals engage in a partnership to conduct business together.

Single Person

An individual not currently in a legal marriage or similar partnership; also refers to entities or businesses owned by one person.

Business for Profit

An organization or enterprise engaged in commercial, industrial, or professional activities with the objective of generating earnings.

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