Covered Interest Arbitrage Definition | Becker

Accounting Dictionary

Covered Interest Arbitrage

In an interest arbitrage transaction, the foreign exchange risk can be covered (covered interest arbitrage) if, at the same time the investor exchanges the domestic currency for the foreign currency to make the foreign investment, the investor also engages in a forward sale of an equal amount of the foreign currency to coincide with the maturity of the investment. See also interest arbitrage and forward hedge.

Related Terms:

Interest Arbitrage [BAR]Forward Hedge [FARBAR]Back to Dictionary

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