Free money?

[Moscow Mule]

It does seems as though historically the OP proposition would have worked quite well over the previous 6 month.

Indeed. As is so often the case with good things financial, the press only start to write about it once all the big money has been made.

[n5gooner]

If I can convince a Japanese bank to lend me £1M, the interest rate is less than 2%.

The Bank of Iceland current account pays out 14% interest.

That means I will be making £140K in interest and paying £20K in interest to the lender.

This is free money.

Can you get a Yen account with the Bank of Icland, then no currency conversion needed.

[thunderlizard]

Not really- a Yen's a Yen, regardless of whose treasury it's sitting in.

[ASB]

Indeed. As is so often the case with good things financial, the press only start to write about it once all the big money has been made.

A chap I know has (some of) his mortgage in yen (and has had it so for about 10 years). In this time the yen has depreciated by about 25% eroding the principle on the debt (in sterling terms. With the interest rates paid this has worked out to be a good deal - but certainly one for the brave.

However, in the case of the chap I know he did it with zero risk. He gets a certain amount of his income in the form of royalty payments denominated in yen. What he did was to convert an amount of his mortgage such as the repayment were met by the royalty income. Free hedging and low interest rates. Neat.

[KentPhilip]

Every man and his dog in the city knows about this type of trade. But currency fluctuations make it very risky. You have, say, a 80% chance of making £100K over the course of the year, but 10% chance (say) of losing £500K if one of the currencies moves by 50% (this DOES happen).
Do you feel lucky, punk?

[DimPrawn]

Every man and his dog in the city knows about this type of trade. But currency fluctuations make it very risky. You have, say, a 80% chance of making £100K over the course of the year, but 10% chance (say) of losing £500K if one of the currencies moves by 50% (this DOES happen).
Do you feel lucky, punk?

If you win, £100K for nothing. Hooray!

If you lose, £500K down, declare yourself bankrupt and walk away.

[thunderlizard]

The kind of person who does that kind of deal wouldn't be bankrupt after a £500k loss.

[Moscow Mule]

The kind of person who does that kind of deal wouldn't be bankrupt after a £500k loss.

But would probably be quite stressed, staying up all night watching the Jap markets for any sign of movement...