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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:

Researcher

An individual who conducts rigorous investigations to discover or interpret new knowledge in a specific field.

Test-Retest Reliability

A measure of consistency where a test is repeated on the same subjects at different times to assess the similarity of outcomes.

Measure

A tool or method used to determine the quantity, degree, or capacity of an attribute or phenomenon.

Descriptive Statistics

Statistical methods that summarize and organize the characteristics of a set of data, using measures such as mean, median, mode, and standard deviation.

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