Covered interest arbitrage: Difference between revisions
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imported>Administrator (CSV import) |
imported>Doug Williamson (Layout.) |
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Covered interest arbitrage activity normally results in the rapid alignment of the forward foreign exchange rate with the related interest rates, as predicted by Interest rate parity theory. | Covered interest arbitrage activity normally results in the rapid alignment of the forward foreign exchange rate with the related interest rates, as predicted by Interest rate parity theory. | ||
== See also == | == See also == | ||
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* [[Interest rate parity]] | * [[Interest rate parity]] | ||
* [[Uncovered interest arbitrage]] | * [[Uncovered interest arbitrage]] | ||
Revision as of 15:33, 17 June 2016
Simultaneously borrowing and depositing in two different currencies and dealing a forward foreign exchange contract between the same currency pair to cover the related foreign exchange exposure.
Covered interest arbitrage activity normally results in the rapid alignment of the forward foreign exchange rate with the related interest rates, as predicted by Interest rate parity theory.
