Interest rate parity

Interest rate parity

A no-arbitrage condition that represents an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two countries.

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Industry/Domain: Investment
Category: Stock exchange
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Related terms

interest rate parity theorem

Financial services; General Finance

Expression that the interest rate differential between two countries is equal to the difference between the forward foreign exchange rate and the spot rate.

Covered Interest Rate Parity

Financial services; General Finance

The principle that the yields from interest-bearing foreign and domestic investments should be equal when the forward currency market is used to predetermine the domestic currency ...

interest rate parity

Investment; Stock exchange

A no-arbitrage condition that represents an equilibrium state under which investors will be indifferent to interest rates available on bank deposits in two. countries

interest rate parity theory

Banking; Business services; Mergers & acquisitions

A theory that relates forward or future spot exchange rates to differences in interest rates between two countries adjusted by the spot rate.

Interest rate parity line (IRP)

Financial services; General Finance

Diagonal line on a graph that characterizes interest rate parity.

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