Deviations from Covered Interest Rate Parity

• 成果类型: Article
• 署名作者: Du, Wenxin; Tepper, Alexander; Verdelhan, Adrien
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; Federal Reserve System - USA; Federal Reserve Bank - New York; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12620
• 发表日期: 2018
• 页码: 915-957
• 关键词: INTEREST ARBITRAGE; foreign-exchange; transaction costs; MARKET; MODEL; liquidity; returns; LIMITS; RISK

摘要

We find that deviations from the covered interest rate parity (CIP) condition imply large, persistent, and systematic arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for major currencies are not explained away by credit risk or transaction costs. They are particularly strong for forward contracts that appear on banks' balance sheets at the end of the quarter, pointing to a causal effect of banking regulation on asset prices. The CIP deviations also appear significantly correlated with other fixed income spreads and with nominal interest rates.