Find it attractive it because it can produce highly stable

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In the world of currency trading and investing, one popular strategy is to borrow in countries with low interest rates (e.g., Japan), convert those funds into a currency with higher yielding short-term bank deposit rates (e.g., U.S. dollars),and then invest that money in those higher yielding deposits. This strategy is called the "carry trade". Hedge funds find it attractive it because it can produce highly stable returns that are uncorrelated with virtually all other investment strategies. But is it arbitrage? Explain your answer.

Reference no: EM133377473

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