An investment strategy where a domestic currency with a low interest rate is switched to a foreign currency to be able to earn higher interest. For instance, if the interest rate for the Euro is higher than that of the U.S Dollars, an investor will sell the Dollars and use the proceeds to buy Euros. The Euro is then used to buy securities and when such securities mature, the Euro is converted back to Dollars.
Related information about uncovered interest arbitrage:
- Uncovered interest arbitrage - Wikipedia, the free encyclopedia
Uncovered interest arbitrage is an arbitrage trading strategy whereby an investor capitalizes on the interest rate differential between two countries.
- Uncovered Interest Arbitrage Definition | Investopedia
A form of arbitrage that involves switching from a domestic currency that carries a lower interest rate to a foreign currency that offers a higher rate of interest on ...
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Uncovered interest arbitrage is a similar strategy to covered interest arbitrage. The difference is that the currency risk is not hedged, so it is not a true arbitrage ...
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Covered and uncovered interest arbitrage? In: Mathematical Finance [Edit categories]. Answer: Covered arbitrage refers to when an investor buys a certain ...
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Definition of uncovered interest arbitrage: An investment strategy where a domestic currency with a low interest rate is switched to a foreign currency to be able ...
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Uncovered Interest Arbitrage. Also found in: Wikipedia, 0.01 sec. Uncovered Interest Arbitrage. The transfer of funds into another currency in order to achieve a ...
- Covered And Uncovered Interest Arbitrage - Finance
Apr 27, 2012 ... Covered interest arbitrage and uncovered interest arbitrage are basically two forms of arbitrage. Recently, both forms have become quite ...
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Document Information: Title: UNCOVERED INTEREST ARBITRAGE, PURCHASING POWER PARITY AND RISK PREMIUMS ON FOREIGN EXCHANGE ...