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Arbitraging Covered Interest rate Parity Deviations and Bank Lending
American Economic Review, 2021I propose and test a new channel through which covered interest rate parity (CIP) deviations can affect bank lending in emerging economies. I argue that when CIP deviations exist, banks attempt to arbitrage them. To do so, banks must borrow in a particular currency.
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Voprosy statistiki, 2023
This paper examines the fulfillment of the covered interest rate parity on Russian data from 2021 to 2023. The fulfillment of the covered interest parity means that investors are not able to profit from currency arbitrage using forward contracts. Crisis periods and restrictions on capital flows can clearly lead to non-fulfillment of interest parity.The
A. V. Zubarev, Ya. P. Motyakina
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This paper examines the fulfillment of the covered interest rate parity on Russian data from 2021 to 2023. The fulfillment of the covered interest parity means that investors are not able to profit from currency arbitrage using forward contracts. Crisis periods and restrictions on capital flows can clearly lead to non-fulfillment of interest parity.The
A. V. Zubarev, Ya. P. Motyakina
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Covered interest rate parity: the Australian case
Applied Economics, 1984In differentiating between long-run and instantaneous covered interest parity and in introducing domestic influences (proxied by unanticipated growth in the monetary base) as short-run determinants of domestic interest rates, this study sheds new light on the interest parity relationship in the Australian context.
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Limits to Arbitrage and Deviations from Covered Interest Rate Parity
2016Nous montrons que les écarts à court terme par rapport à la parité couverte des taux d’intérêt se sont creusés au premier semestre de 2015. Depuis la décision de la Banque nationale suisse de renoncer à sa politique de taux de change plancher, l’ampleur et la volatilité des écarts par rapport à cette parité se sont accrus pour plusieurs couples de ...
Pinnington, James, Shamloo, Maral
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Empirical Investigation of Covered Interest Rate Parity in Developed and Emerging Markets
SSRN Electronic Journal, 2012We use deviations in the covered interest rate parity (CIRP) condition to examine violations of the law of one price (LOP). We use the time periods around the recent financial crisis to examine the dynamics of CIRP violations. We find that, for both developed and emerging economies, LOP tends to hold during normal economic times but that it is severely
Emrah Sener +2 more
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The Term Structure of Covered Interest Rate Parity Violations
The Journal of FinanceABSTRACTWe quantify the impact of risk‐based and nonrisk‐based intermediary constraints (IC) on the term structure of covered interest rate parity (CIP) violations. Using a stochastic discount factor (SDF) inferred from interest rate swaps, we value currency derivatives. The wedge between model‐implied and observed derivative prices reflects the impact
PATRICK AUGUSTIN +3 more
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Deviations from Covered Interest Rate Parity: The Case of British Pound Sterling versus Euro
The Journal of Financial Data Science, 2020The authors find that the foreign exchange derivatives market for British pound sterling versus euro deviates from the covered interest rate parity (CIP). The resulting arbitrage opportunities seem to be persistent and vary systematically. They are driven not only by Brexit-related politics.
Frank Lehrbass, Thamara Sandra Schuster
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Covered interest rate parity violations : can they be anticipated?
2017The covered interest rate parity (CIP) condition is widely known and taught in academia. Since the Great Financial Crisis, sustained violations of the CIP condition have occurred, pointing to arbitrage opportunities. Pinnington and Shamloo (2016) investigated these deviations for the foreign currency cross-currency basis (basis) against Swiss franc ...
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Covered Interest Rate Parity Deviations in External Emerging Market Sovereign Debt
The Journal of Fixed Income, 2019Non-U.S. dollar denominated external emerging market debt issuance in euros, yen, and sterling has grown substantially in recent years. This paper is the first study to explore how non-dollar external emerging market bonds violate covered interest rate parity relative to their dollar-denominated external emerging market debt counterpart bonds for a ...
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Covered Interest Rate Parity: The Case of the Czech Republic [PDF]
, 2008 This paper tries to find out, whether the Covered Interest Rate Parity (CIRP) theory was valid for exchange rate CZK/EUR during the period ranging from May 2001 to November 2007. As a main tool, a common OLS regression was chosen. It was augmented by MA(1) process of residuals and by ARCH (6) model of residuals’ variance.
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