interest arbitrage

interest arbitrage
Transactions between financial centres in foreign currencies that take advantage of differentials in interest rates between the two centres and the difference between the forward and spot exchange rates. In some circumstances it is possible to make a profit by borrowing money on domestic markets at fixed rates, buying a foreign currency, lending the foreign currency at fixed rates, and entering into a forward contract to buy domestic currency.

Big dictionary of business and management. 2014.

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  • interest arbitrage — UK US noun [U] (also interest rate arbitrage) FINANCE ► a method of making a profit by buying currency in one place and selling it in another place, making use of the difference in interest rates in the two places: »A tax on international… …   Financial and business terms

  • Interest arbitrage —   The act of using foreign exchange swap contracts to earn a higher rate of return in the market of another currency. The (possible) benefit arises from the use of the foreign currency for investment which will give a return which is greater than …   International financial encyclopaedia

  • Covered interest arbitrage — is the investment strategy where an investor buys a financial instrument denominated in a foreign currency, and hedges his foreign exchange risk by selling a forward contract in the amount of the proceeds of the investment back into his base… …   Wikipedia

  • Uncovered Interest Arbitrage — 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 deposits. There is a foreign exchange risk implicit in this transaction since… …   Investment dictionary

  • Uncovered interest arbitrage — is a form of arbitrage where funds are transferred abroad to take advantage of higher interest in foreign monetary centers. It involves the conversion of the domestic currency to the foreign currency to make investment; and subsequent re… …   Wikipedia

  • Interest rate parity — is a no arbitrage condition representing an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two countries.[1] Two assumptions central to interest rate parity are capital mobility and… …   Wikipedia

  • interest rate arbitrage — UK US noun [U] FINANCE ► INTEREST ARBITRAGE(Cf. ↑interest arbitrage) …   Financial and business terms

  • Arbitrage — For the upcoming film, see Arbitrage (film). Not to be confused with Arbitration. In economics and finance, arbitrage (IPA: /ˈɑrbɨtrɑːʒ/) is the practice of taking advantage of a price difference between two or more markets: striking a… …   Wikipedia

  • arbitrage — /ahr bi trahzh / for 1, 3; /ahr bi trij/ for 2, n., v., arbitraged, arbitraging. n. 1. Finance. the simultaneous purchase and sale of the same securities, commodities, or foreign exchange in different markets to profit from unequal prices. 2.… …   Universalium

  • Arbitrage pricing theory — (APT), in finance, is a general theory of asset pricing, that has become influential in the pricing of shares. APT holds that the expected return of a financial asset can be modeled as a linear function of various macro economic factors or… …   Wikipedia

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