The effect of liquidity risk on carry trade returns Thesis

The effect of liquidity risk on carry trade returns - Thesis Example isk caused by huge volatility in financial market can lead investors or speculators into operating with extremely high margins that could eventually compel traders to scale down or totally halt their positions to avoid currency crash; (iv) finally, liquidity risk can lead to a drastic reduction in investor’s expectation for gains, which invariably helps to correct the violation of Uncovered Interest Rate Parity (UIP) normally referred to as â€Å"forward premium puzzle† (Brunnermeier and Pedersen, 2009). In this paper, qualitative research methodology is employed by scrutinizing related literature. Any observable limitations in this study stem from the body of literature consulted in the course of preparing this research, and attempts are made to restrict the subject-matter only to liquidity risk and its effects on carry trade returns. The financial crisis that has recently hit the global economy has highlighted an important concept that has long been ignored by economists, policymakers and other stakeholders in the industry: the importance of liquidity in the health of financial systems. According to Ben Bernanke, chairman of the Federal Reserve System, the â€Å"weak liquidity risk controls were a common source of the problems many firms have faced" (Bernanke, 2008). But it was only after the financial meltdown in 2007-2008 that it was acknowledged and sufficiently recognized by the industry. The financial speculators have long operated with such greed that eventually resulted to the vulnerability of the financial and banking industry with the gigantic risks that have been accumulated, which is unprecedented in modern history (Froot, 2001). The practices of unwinding of investors’ positions, higher liquidity risk, higher margins and the consequent low returns have eventually created the volatility in the financial market. An investigation on the liquidity issue and its effect on all financial markets are quite comprehensive and so, for this paper, I would be

Ripe Figs Research Paper Example | Topics and Well Written Essays - 500 words

Ripe Figs - Research Paper Example Although she had to wait only for a few months, she would go into the garden to see how ripe the figs were, to know how much time was left for her to go down the Bayou-Lafourche. The narrator called her â€Å"as restless as a humming-bird†, dancing out to the fig trees to know the condition of the figs. When she would see them ripening, this would â€Å"made her sing and dance the whole long day†. This showed that Babette felt as if she would speed up the natural process of ripening of the figs, by checking out everyday how they were. And every day, she would come back â€Å"disconsolate†, which means that she would feel frustrated enough when she would see that the figs were ripening very slowly. When Maman Nainaine told her that the fips were ripening fast, she said, â€Å"I think they have ripened very late† (400). Her impatience had made her feel that she had waited very long for the figs to get ripened. So, we see that Babette had the weak point of im patience, which made her feel as if time was moving slowly for her. In contrast, Maman Nainaine had a very patient personality. She was practical enough to know that figs take ample time to get ripened. She had told her god-child to wait to go to her cousins, till the figs get ripened. She was in no hurry, which depicted her calm personality. She wanted to make things go according to her wishes. She patiently waited for the ripening of the figs, when Babette would go down to the fig trees every day. In contrast to Babette’s personality, the narrator has called her â€Å"as patient as the statue of la Madone†. This comparison gave a saintly touch to her personality. For her, time had move very fast, like when she said, â€Å"how early the figs have ripened this year!† This was because she was waiting for nature to complete its natural course of action. Hence, we see that