Interest Arbitrage

1
Interest Arbitrage

• The process by which individuals seek to make a
  profit by taking advantage of differences in
  short-term interest rates available on comparable
  assets denominated in different currencies at a
  given point in time.

2
Covered Interest Parity Condition

• The forward exchange value of a currency tends
  to exceed its spot value by the same percentage
  as its interest rates are lower than foreign
  interest rates.
• ( iU.S.- iU.K.) ( ef e ) / e