SuperCalc

    Carry Trade Simulator

    Simulate carry trade strategy with exchange risk analysis and profit projections. Understand the risks and rewards of currency arbitrage.

    Trade Parameters

    12.2 months
    BRL/USD
    Positive = USD appreciation

    Interest Rates

    Interest Rate Differential
    -8.50%
    Negative Carry

    Transaction Costs

    Brazilian tax on foreign exchange operations

    Trade Results

    Net Profit/Loss
    -R$ 9.598,06
    -9.60% return

    Breakdown Analysis

    Interest Differential-R$ 8.618,06
    Exchange ImpactR$ 0,00
    Total Costs-R$ 980,00
    Net Result-R$ 9.598,06

    Risk Analysis

    Break-Even Point
    +1.75%
    USD movement needed to break even
    Risk LevelHigh
    Carry StrategyNegative
    With negative carry, you pay +8.50% annually, requiring significant currency appreciation.

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    How It Works

    A carry trade is an investment strategy where you borrow money in a currency with low interest rates and invest it in a currency with higher interest rates, profiting from the interest rate differential. However, currency fluctuations can significantly impact your returns, sometimes erasing gains or creating losses.

    The strategy works best when the high-yield currency remains stable or appreciates against the funding currency. The main risk is currency depreciation, which can quickly turn profitable trades into losses. This calculator helps you understand both the profit potential and the exchange rate risk.

    Successful carry trading requires careful analysis of interest rate differentials, currency volatility, economic fundamentals, and proper risk management. It's important to consider transaction costs, spreads, and taxes (like IOF in Brazil) that can reduce your net returns.

    Practical Examples

    Example: BRL to USD Carry Trade

    • • Capital: R$ 100,000
    • • Funding Rate (BRL): 13.75%
    • • Investment Rate (USD): 5.25%
    • • Negative Carry: -8.5% annually
    • • Break-even: USD needs to appreciate 8.5%+ vs BRL

    Example: USD to TRY Carry Trade (Historical)

    • • Funding Rate (USD): 2%
    • • Investment Rate (TRY): 15%
    • • Positive Carry: +13% annually
    • • Risk: Turkish Lira volatility
    • • High reward but very high risk

    Frequently Asked Questions

    Monitor Central Banks: Interest rate changes by central banks can quickly alter carry trade dynamics.

    Consider Economic Stability: Political and economic instability can cause rapid currency devaluations.

    Use Stop Losses: Set clear exit points to manage downside risk from adverse currency movements.

    Factor in All Costs: Include spreads, transaction fees, and taxes when calculating potential returns.