Lily- thanks for this post! I really appreciate your comments on figuring out if we are overpaying or underpaying for risk. That's a million dollar question!
You're correct. I reglanced over the writing this morning. Not a currency trader myself, but that's the correct implication (if you want to eradicate the profit of an arbitrage under CIRP, you'd expect that the higher interest rate is offset by an increasingly adverse exchange rate).
You're back :-)
Looking forward to Part 2!
Lily- thanks for this post! I really appreciate your comments on figuring out if we are overpaying or underpaying for risk. That's a million dollar question!
Shouldn't you expect EUR to weaken relative to USD if interest in EUR>USD?
You're correct. I reglanced over the writing this morning. Not a currency trader myself, but that's the correct implication (if you want to eradicate the profit of an arbitrage under CIRP, you'd expect that the higher interest rate is offset by an increasingly adverse exchange rate).
Fixed it.