covered interest- rate parity的英语解释

题目

covered interest- rate parity的英语解释

答案

The principle that the yields from interest-bearing foreign and domestic investments should be equal when the currency market is used to predetermine the domestic currency payoff from a foreign investment.
Interest rate parity
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The interest rate parity is the basic identity that relates interest rates and exchange rates.The identity is theoretical,and usually follows from assumptions imposed in economics models.There is evidence that supports as well as rejects interest rate parity.
Interest rate parity is an arbitrage condition,which says that the returns from borrowing in one currency,exchanging that currency for another currency and investing in interest-bearing instruments of the second currency,while simultaneously purchasing futures contracts to convert the currency back at the end of the investment period should be equal to the returns from purchasing and holding similar interest-bearing instruments of the first currency.If the returns are different,investors could theoretically arbitrage and make risk-free returns.
Looked at differently,interest rate parity says that the spot and future prices for currency trades incorporate any interest rate differentials between the two currencies.
Two versions of the identity are commonly presented in academic literature:covered interest rate parity and uncovered interest rate parity.
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