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A foreign exchange dealer at JP Morgan in NY can invest $5m or the foreign currency equivalence of the bank's short term funds in
A foreign exchange dealer at JP Morgan in NY can invest $5m or the foreign currency equivalence of the bank's short term funds in a covered interest arbitrage with Denmark. She has the following quotes: Spot exchange rate: 3-month Forward rate: 3-month $ interest: 3-month DKr interest DKr7.5000/$ DKr7.5372/$ 3% annual 5% annual Can the dealer make a covered interest arbitrage profit?
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Yes the dealer can make a covered interest arbitrage profit in this scenario Heres why Covered Interest Arbitrage Explained This strategy exploits the ...
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
14th edition
133879879, 978-0133879872
