The act of capitalizing on the discrepancy between the forward rate premium and the interest rate differential called

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The act of capitalizing on the discrepancy between the forward rate premium and the interest rate differential is known as covered interest arbitrage. This involves taking advantage of the differences in interest rates between two currencies by using forward contracts to cover the exchange risk. Triangular arbitrage involves exploiting discrepancies between three different currencies, while locational arbitrage involves profiting from price differences between different geographical locations for the same product or asset. Interest rate parity refers to the idea that the interest rate differential between two countries should be equal to the percentage difference between the forward exchange rate and the spot exchange rate.

The Act of Capitalizing on the Discrepancy Between the Forward