Isn't the paper saying Covered Interest Parity is violated because dealers deserve riskless arbitrage profits?

《At the same time, the literature documents that most active investors have not been able to outperform passive investment strategies.

Treynor offers his insights on these matters in a series of articles. In general, the portfolio managers’ actual returns fail to exceed market averages. The failure is due to the dealer-based quality of the capital market and the presence of the dealers’ spreads.》

《 [...] as the dealers expand their balance sheets, they demand higher premiums from their clients to provide synthetic dollar funding (e.g., borrowing in euros and swapping into

dollars) relative to direct dollar funding (i.e., borrowing dollars in the money market), resulting in CIP deviations. They earn an extra premium by increasing the forward rates compared to spot rates: As F/S

increases, the relative cost of purchasing the US-Dollar at maturity compared to the spot contract falls. As the dealers are the sellers of dollars in the spot and the buyers of them in

forward, the dealer can obtain more units of dollars with the same amount of foreign currency as the forward rate increases relative to the spot rate.》

In other words, do dealers profit from riskless arbitrage, backstopped in case of counterparty default by the Fed?

What are the implications of the violation of no-arbitrage conditions on fair pricing models? Do prices become arbitrary?

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The paper does a lot of things. My post looks at contractual equations.

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《USD loan + Spot FX + GBP deposit = FX forward》

Should the "=" be a "<", since CIP is observably persistently violated?

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