Covered Interest Arbitrage Illustration 2
From the following data calculate the possibilities of gain/loss in arbitrage:
Spot Rate CHF 0.01140 = JPY 1
6 months forward rate CHF 0.01138 = JPY 1
Annualized interest rate on 6 months JPY = 0.05%
Annualized interest rate on 6 months CHF = 0.5%
(Ans.: Borrow ¥, gain 4,012 ¥ per million)
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