Covered interest arbitrage
A)ensures that currency futures prices are set correctly.
B)ensures that commodity futures prices are set correctly.
C)ensures that interest rate futures prices are set correctly.
D)ensures that currency futures prices and commodity futures prices are set correctly.

Question

Quizplus · Accepted Answer

Covered interest arbitrage is a strategy that involves using forward contracts to hedge against exchange rate risk, ensuring that currency futures prices reflect the difference in interest rates between two currencies. It does not directly relate to setting commodity futures or interest rate futures prices correctly.

Covered Interest Arbitrage