When parity conditions are not in effect in currency and money markets,traders could make extraordinary profits from a practice known as ________.

Question

Quizplus · Accepted Answer

Covered interest rate arbitrage involves taking advantage of the differences in interest rates between two countries while using forward contracts to hedge against exchange rate risk, allowing traders to make risk-free profits when parity conditions do not hold.

When Parity Conditions Are Not in Effect in Currency and Money