A situation in which the ratios between currency values and interest rates between two countries are approximately equivalent. This means that there is no advantage to borrowing one currency to purchase the other currency, and therefore no arbitrage opportunities or profitable carry trade involving the currencies of the two nations.
Related information about covered interest rate parity:
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Economists have found empirical evidence that covered interest rate parity generally holds, though not with precision due to the effects of various risks, costs , ...
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This term refers to a condition where the relationship between interest rates and the spot and forward currency values of two countries are in equilibrium.
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Covered interest rate parity says that the guaranteed returns from .... This is known as the Covered Interest Rate Parity Condition (CIRP). Covered Interest ...
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Covered interest rate parity. Assuming the arbitrage opportunity described above does not exist, then the relationship for US dollars and pounds sterling is: ...
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55. Daniel L. Thornton. Daniel L. Thornton is an assistant vice president at the Federal. Reserve Bank ofSt. Louis. David Kelly provided research assistance.
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Mar 28, 2011 ... Covered Interest Rate Parity (CIP) relates the nominal interest rate in any economy, the United States say, to the nominal interest rate in any ...
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The principle that the yields from interest-bearing foreign and domestic investments should be equal when the currency market is used to predetermine the ...
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of foreign currency. The covered interest rate parity relation (5.1) on page 123 of ( S) falls out of the two ways to obtain one unit of foreign currency at a future date ...