Covered Interest Arbitrage Illustration 2


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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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