<u>The trader involved is in carry trade.
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Further Explanation:
Carry Trade: It is defined as a strategy that is used in trading which involves borrowing money at a lower rate of interest and investing in an asset that gives a higher rate of return. It involves borrowing money in a currency that is having a low rate of interest and convert the borrowed sum of money into other currency. The amount is then placed in a deposit in the currency that offers a high-interest rate. It invests in the assets like bonds, stocks, real estate, or commodities that are designated in the other currency.
The two risks that are involved in carry trade are the risk of decline in the price of the assets in which investment is made and exchange risk. This is common in the Foreign exchange market.
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Therefore, the trader is involved in carry trade.
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Answer details:
Grade: High School
Subject: Economics
Chapter: Types of trade
Keywords: the interest rate, South Korea, 1 percent, deposits in British banks, 7 percent, a trader, 1 million South Korean won, British pounds, deposits in a British bank, carry trade, trade involved in, FX market.
