To find out if there is an abitrage opportunity can you use the two formulas? Borrow foreign if A. 1 + rD > [(1 + rF)(Forward rate)]/Spot rate, B. rD - fF > (FWD Rate - Spot Rate)/ Spot rate
B is a linear approximation of A
To find out if there is an abitrage opportunity can you use the two formulas? Borrow foreign if A. 1 + rD > [(1 + rF)(Forward rate)]/Spot rate, B. rD - fF > (FWD Rate - Spot Rate)/ Spot rate
B is a linear approximation of A