Buy-side firm and Covered interest arbitrage: Difference between pages
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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. | |||
==See also== | == See also == | ||
*[[ | * [[Arbitrage]] | ||
*[[ | * [[Covered arbitrage]] | ||
*[[ | * [[Covered position]] | ||
*[[ | * [[Interest rate parity]] | ||
*[[ | * [[Uncovered interest arbitrage]] | ||
[[Category:The_business_context]] | [[Category:The_business_context]] | ||
[[Category:Financial_products_and_markets]] | [[Category:Financial_products_and_markets]] | ||
Revision as of 09:00, 19 October 2022
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.
