The 2-month interest rates in Switzerland and the United States are, respectively, (2 %) and (5 %)
Question:
The 2-month interest rates in Switzerland and the United States are, respectively, \(2 \%\) and \(5 \%\) per annum with continuous compounding. The spot price of the Swiss franc is \(\$ 0.8000\). The futures price for a contract deliverable in 2 months is \(\$ 0.8100\). What arbitrage opportunities does this create?
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This scenario presents an opportunity for covered interest rate arbitrage Heres the breakdown Borrow ...View the full answer
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