covered interest rate arbitrage
An approach to limiting foreign exchange risk by purchasing a foreign currency Denominated investment and selling a forward contract for the same currency. For instance, an investor exchanges US Dollars for Japanese Yen and uses it to buy Yen denominated bonds. The investor then sells the Yen through a forward contract, where it is agreed that the Yen be converted back to Dollars at a predetermined rate.
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circularisation of debtors
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