Question
Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,100,000 or its yen equivalent,
Takeshi Kamada, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest
$5,100,000
or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes. Is CIA profit possible? If so, how?
| Arbitrage funds available | $ | 5,100,000 | |
| Spot rate (/$) | 118.57 | ||
| 180-day forward rate (/$) | 117.87 | ||
| U.S. dollar annual interest rate | 4.806 | % | |
| Japanese yen annual interest rate | 3.396 | % |
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Consolidation In The European Financial Industry
Authors: R. Bottiglia, E. Gualandri , G. Mazzocco
1st Edition
0230233228,0230275028
