Define interest rate parity. What is the relationship between interest rate parity and forward rates?
Answer to relevant QuestionsDefine the terms covered interest arbitrage and uncovered interest arbitrage. What is the difference between these two transactions? The newspaper reports that a given June Eurodollar future settled at 93.55. What was the annual yield? How many dollars does this represent? What happens to the premium you paid for the above option in the event you decide to let the option expire unexercised? What happens to this amount in the event you decide to exercise the option? What were the main causes of Argentina’s crisis of 2001–2002? What lessons were learned and what steps were taken to normalize Argentina’s economy? Define the following terms: a. Foreign exchange exposure. b. The three types of foreign exchange exposure:
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