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This video shows you the derivation of Interest Rate Parity using a simple example. If interest rate parity does not hold, one can take an advantage of it by conducting covered interest arbitrage.
This video can serve as a supplement to Chapter 6 of International Financial Management textbook by Eun, Resnick, and Chuluun from McGraw-Hill.
Other videos in this series:
- Covered Interest Arbitrage: Step-by-Step Example 1: • Covered Interest Arbit...
- Covered Interest Arbitrage: Step-by-Step Example 2: • Covered Interest Arbit...
Other relevant playlists:
- Arbitrage Opportunities in the Foreign Exchange Market
- Hedging Foreign Exchange Risk
- Exchange Rate Basics
- Currency Options