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English definition of “interest parity”

interest parity

noun [U]
 
 
(also interest rate parity) FINANCE
the theory that the possible profit from exchanging currency to that of a country with a lower interest rate, then investing the money in that country, is equal to the possible profit from investing the money in the original country: According to interest parity, interest rate arbitrage cannot produce a risk-free return.
(Definition of interest parity from the Cambridge Business English Dictionary © Cambridge University Press)
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