Interest Rate Arbitrage in Negative Yielding Currencies

Arbitrage example using Swiss Franc options

JENS PUNSTEIN
6

In a world of negative interest rates and growing risk for asset price bubbles everyone is seeking new high yield/low risk opportunities. One might be based on the weird situation that banks pay deposit rates which are above the inter-bank lending rates. This offers a possibility of arbitrage in CHF and EUR especially for wealthy private investors with a sizeable bond or equity portfolio.

1. Idea
The idea is very simple. Get...

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