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by ham_sandwich
2714 days ago
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I think you’re specifically thinking of covered interest rate arbitrage, in which a trader borrows in one currency at a cheap rate, lends in another currency at a more expensive rate and uses a currency forward to hedge out the exchange rate risk, netting the rate differential in the process. It’s not truly ‘arbitrage’ in the formal sense;there are still some notable risks in such a trade. |
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