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Covered interest parity
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| 1.02 MB | Adobe PDF |
Orientador(es)
Resumo(s)
This report aims to study the evolution of the Covered Interest Rate Parity (CIP)
over the course of the last years. With the 2007 financial crisis many fundamental
relationships changed, and CIP was not an exception. To infer whether or not this was
an isolate event, the behaviour of the CIP during the European Sovereign debt crisis was
studied. Currency pairs such as EURUSD showed significant CIP deviations during
both crises. This work shows that currently, spreads are mostly explained by
counterparty risk and market sentiment factors, which are extremely different factors
from the ones explaining the spread during 2003-06.
Key
Descrição
Palavras-chave
Foreign exchange Covered interest rate parity Counterparty risk Financial market turmoil