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CHAPTER III EXCHANGE RATES, INTEREST RATES, PRICES …

John Maynard Keynes (1923). Notes: ⋄ Steps (2) and (4) simultaneously done produce a FX swap transaction! In this case, we buy the FC forward at Ft,T and go sell the FC at St. We can think of (Ft,T - St) as a profit from the FX swap. ⋄ We get the same IRPT equation if we start the covered strategy by (1) borrowing DC at

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