If interest rate parity exists, then ____ is not feasible.
A) forward realignment arbitrage
B) triangular arbitrage
C) covered interest arbitrage
D) locational arbitrage

Question

If interest rate parity exists, then ____ is not feasible.​
A) ​forward realignment arbitrage
B) ​triangular arbitrage
C) ​covered interest arbitrage
D) ​locational arbitrage

Quizplus · Accepted Answer

Interest rate parity ensures that covered interest arbitrage is not feasible because it implies that the forward exchange rate adjusts to offset any interest rate differentials between two currencies, eliminating the opportunity for arbitrage profits.

If Interest Rate Parity Exists, Then ____ Is Not Feasible