4 ms·
The higher interest rate covers the higher inflation. Currencies are very well arbitraged already, I wouldn't expect any inefficiencies to profit from.
by konschubert 9y ago
The higher interest rate covers the higher inflation. Currencies are very well arbitraged already, I wouldn't expect any inefficiencies to profit from.
- mortehu 9y agoBut check this out: http://faculty.chicagobooth.edu/workshops/finance/pdf/Verdelhan_Deviations.pdf http://faculty.chicagobooth.edu/workshops/finance/pdf/Verdel... "We find that deviations from the covered interest rate parity condition (CIP) imply large, persistent, and systematic arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for major currencies are not explained away by credit risk or transaction costs."