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

FINEX

The Financial Futures and Options Division of the New York Cotton Exchange (NYCE), with a trading floor in Dublin, FINEX Europe, creating a 24-hour market in most FINEX contracts.

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