What problem does it solve?
FX carry trades earn interest rate differentials but expose traders to spot and volatility risk; this Skill helps quantify that tradeoff by translating spot, forward, vol surface, and historical data into risk-adjusted metrics and clear trade recommendations.
Core Features & Use Cases
- Carry-to-Vol Calculations: Compute annualized carry from forward points and divide by ATM implied volatility to produce carry-to-vol ratios across tenors.
- Forward Curve & Tenor Optimization: Map the full forward curve to locate tenors with the most attractive risk-adjusted carry and identify sweet-spot maturities.
- Vol Surface & Skew Assessment: Extract ATM vols, 25-delta risk reversals, and butterflies to assess skew, tail risk, and volatility regime that can make or break a carry trade.
- Historical Context: Use realized volatility and 52-week spot ranges to contextualize direction and liquidity considerations.
- Use Case: A currency strategist evaluating whether to short high-yielding currency vs long low-yielding currency for 3M or 6M tenors and sizing positions by carry-to-vol and skew signals.
Quick Start
Run an FX carry analysis for EURJPY 3M using spot, forward curve, vol surface, and one year of historical pricing and return carry-to-vol metrics with an entry recommendation.
