Covered interest arbitrage

Definition:

Occurs when a portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges the resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Return on sales

A measurement of operational efficiency equalingnet pre-tax profits divided by net sales expressed as a percentage.

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