covered interest arbitrage การใช้

For example, as per the chart at right consider that an investor with $ 5, 000, 000 USD is considering whether to invest abroad using a covered interest arbitrage strategy or to invest domestically.
If there were no impediments, such as transaction costs, to covered interest arbitrage, then any opportunity, however minuscule, to profit from it would immediately be exploited by many financial market participants, and the resulting pressure on domestic and forward interest rates and the forward exchange rate premium would cause one or more of these to change virtually instantaneously to eliminate the opportunity.
Investing $ 5, 000, 000 USD domestically at 3.4 % for six months ignoring compounding, will result in a future value of $ 5, 085, 000 USD . However, exchanging $ 5, 000, 000 dollars for euros today, investing those euros at 4.6 % for six months ignoring compounding, and exchanging the future value of euros for dollars at the forward exchange rate ( on the delivery date negotiated in the forward contract ), will result in $ 5, 223, 488 USD, implying that investing abroad using covered interest arbitrage is the superior alternative.