The true cost of shorting

The costs associated with an emerging market long/short strategy can be a constraint on upside capture, which is an added consideration for investors assessing increasing offerings in this space. There is the cost of carry if you short something, the spread in credit default swaps used, the relative interest rates and the cost of carry on shorting FX and even in option volatilities. The thing is, whatever the cost is – and it varies from very small to high – you have to factor it into your total return.

Colm McDonagh, Insight Investment

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