Deviations from Covered Interest Rate Parity: Evaluating Drivers for Changes

  • Fernando Chertman University of California Santa Cruz
Keywords: interest rate parity, deviation, liquidity, risk

Abstract

 

In this paper I evaluate the deviation from covered interest rate parity after the great financial crisis. As a new phenomenon, this deviation has been approached both theoretically (violating the no arbitrage condition) and empirically. Through an extensive literature review, I have mapped the possible drivers of the deviation and their proxies. I have applied my analysis in a set of countries that haven’t been explored in this literature so far, even though represent a significative part of the foreign exchange market. Regarding the results, I have obtained a significant weight in the financial drivers and a small impact over the classical liquidity proxies used in the literature. This result claims for a deeper analysis and open the possibility to evaluate this phenomenon under a new perspective.   

 

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Published
2020-08-31
How to Cite
Chertman, F. (2020). Deviations from Covered Interest Rate Parity: Evaluating Drivers for Changes. Journal of Quantitative Methods, 4(2), 1-1. Retrieved from https://ojs.umt.edu.pk/index.php/jqm/article/view/212
Section
Articles