What kind of arbitrage occurs when the difference between two countries' interest rates is not equal to the forward discount/premium on their currencies?

Question

Quizplus · Accepted Answer

Covered interest arbitrage involves capitalizing on the discrepancy between the interest rate differential between two countries and the forward discount or premium on their currencies. This strategy aims to profit from the arbitrage opportunity arising when the interest rate differential does not match the forward rate differential.

What Kind of Arbitrage Occurs When the Difference Between Two