Covered Interest Arbitrage The following common approximation of the IRP (Interest Rate Parity) equation is as follows and is valid when S is not too volatile: ( 1 + i$) = (F/S) (1 + ic) This equation basically examines the differing interest rates i$ and ic that are prevailing interest rates in two different countries and explains that a dollar invested in US at the interest rate of i$ would yeild the same as the dollar converted into a foreign currency at the spot rate of (F/S) and invested... Read full post here
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment