Interest Rate Parity Money Market Hedge
Covered interest parity CIP is the closest thing to a physical law in international finance. Suppose that you pay 2600 for 1 share of a stock index exchange-traded fund ETF that tracks the Nasdaq 100 at the beginning of the year and that it pays 52 in dividends during the yearAt the same time you sell a futures contract short for the Nasdaq 100 that is cash-settled requiring you to pay 2700 at the. Risk Report A Quad 4 Investing Playbook Investing Global Stock Market Equity Market In finance an exchange rate is the rate at which one national currency will be exchanged for another. Interest rate parity money market hedge . How the Money Market Hedge Works. It holds that the interest rate differential between two currencies in the cash money markets should equal the differential between the forward and spot exchange rates. Otherwise arbitrageurs could make a seemingly riskless profit. It is also regarded as the value of one countrys currency in relation to another currency.
