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The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global banks lend to each other in the interbank market for short-term loans. It is reported at 11:00am London time for five currencies including USD and GBP. Suppose you are an FX trader working at a BBB-rated UK bank. At 11:00am, you observed the following real-time information: 1-year LIBOR for GBP: 1GBP 1-year LIBOR for USD: IUSD Spot exchange rate (USD per GBP): S 1-year forward exchange rate (USD per GBP): F You immediately found that F > I+ , based on the real-time market information you observed. 1+GBP More specifically, you found that the LIBOR basis is (1 + iusD) - F {1 + iGBP) = -25 basis points. Would it be possible for you to implement a covered interest rate parity (CIP) arbitrage trading strategy to earn riskless arbitrage profits based on abovementioned findings and real-time market information? Explain your answer. UCD S