One of the well-discussed pure arbitrage examples is "covered
interest arbitrage" (e.g., Madura, 2007), which involves coinstantaneous transactions across the domestic and foreign spot currency markets, the domestic and foreign forward/futures currency markets, in addition to the domestic and foreign credit markets.
"A classroom exercise to simulate triangular and covered
interest arbitrage." Journal of Financial Education 30 (Summer): 73-86.
Indian Currency and Finance [Keynes, 1913] explored the working of the gold-exchange standard and the need for a reserve bank to manage India's participation in it; The Economic Consequences of the Peace [Keynes, 1919] argued that the transfer problem made the reparations clauses of the Versailles Peace Treaty unworkable; A Tract on Monetary Reform [Keynes, 1923] exposed the social costs of hyperinflation, discussed inflation as a tax on holding money and government bonds, and analyzed covered
interest arbitrage in the forward market for foreign exchange in the resulting world of floating exchange rates [Dimand, 1988]; and The Economic Consequences of Mr.
The theoretical forward rate may be observed in the currency markets where there are no obvious covered
interest arbitrage opportunities.
The most recent of his journal articles is "Gold-Point Arbitrage and Uncovered
Interest Arbitrage under the 1925-31 Dollar-Sterling Gold Standard," Explorations in Economic History (1993).
(7) For example, to avoid reverse
interest arbitrage arising from excess U.S.
Two theories, namely
Interest Arbitrage and Speculation, explaining the relationship between spot and forward rates are examined.