Covered Interest Parity Arbitrage
نویسندگان
چکیده
Abstract To understand deviations from covered interest parity (CIP), it is crucial to account for heterogeneity in funding costs across both banks and currency areas. For most market participants, the no-arbitrage relation holds fairly well when implemented using marginal risk-free investment instruments. However, a few high-rated do enjoy CIP-arbitrage opportunities. Dealers avert inventory imbalances stemming lower-rated banks’ usage of FX swaps obtain dollar by inducing opposite (arbitrage) flows banks. Arbitrage trades are difficult scale, however, because increase as soon arbitrageurs positions. Authors have furnished an Internet Appendix, which available on Oxford University Press Web site next link final published paper online.
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ژورنال
عنوان ژورنال: Review of Financial Studies
سال: 2022
ISSN: ['0893-9454', '1465-7368']
DOI: https://doi.org/10.1093/rfs/hhac026