Interest rate parity

From ACT Wiki
Revision as of 14:50, 4 December 2015 by imported>Doug Williamson (Layout.)
Jump to navigationJump to search

(IRP).


This theory describes the expected relationship between spot and forward forward exchange rates, and the interest rates in the related currency pair.

Under efficient market conditions the interest rate parity theory predicts that the forward FX rate (available in the market today) should be equal to the spot FX rate, adjusted for the difference in interest rates between the currency pair over the relevant period.


See also