Overview

uncovered interest parity


Show Summary Details

Quick Reference

A relationship between domestic and foreign interest rates derived under the assumption that the forward currency market is not used to hedge exchange rate risk. Uncovered interest parity requires(1 + ra) = (1 + rb)e0/E(e1)where ra is the domestic interest rate, rb is the foreign interest rate, e0 the current exchange rate, and E(e1) the expected future exchange rate. See also covered interest parity.

(1 + ra) = (1 + rb)e0/E(e1)

Subjects: Economics.


Reference entries

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.