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Currency Arbitrage Calculator
Evaluate a carry trade — borrowing in a low-rate currency to invest in a high-rate one — with the same rigor real currency risk demands, not just the rate differential.
Currency arbitrage fundamentals (carry trade).
Cross-border arbitrage means borrowing in a low-rate currency and investing in a high-rate one, capturing the differential. Covered Interest Rate Parity (CIP) states the theoretical forward should be:
In covered arbitrage, you lock in that forward and the result doesn’t depend on the future exchange rate. In uncovered arbitrage — what this tool calculates — there’s no hedge: the return depends on where the currency actually moves, and under Uncovered Interest Rate Parity (UIP) the expected exchange rate should already offset much of that differential. That’s why the real expected return is almost always lower than the rate differential alone suggests.
The reference rates shown are 2026 market approximations. Adjust them to the day’s real data before deciding.
Forward = Spot × (1 + i_dom) / (1 + i_ext)In covered arbitrage, you lock in that forward and the result doesn’t depend on the future exchange rate. In uncovered arbitrage — what this tool calculates — there’s no hedge: the return depends on where the currency actually moves, and under Uncovered Interest Rate Parity (UIP) the expected exchange rate should already offset much of that differential. That’s why the real expected return is almost always lower than the rate differential alone suggests.
The reference rates shown are 2026 market approximations. Adjust them to the day’s real data before deciding.
Arbitrage Setup
You picked the same currency for both origin and destination — there’s no rate differential or arbitrage possible between a currency and itself. Change one of the two to continue.
Auto-fills as a reference when you change the pair — verify the current rate before deciding.
Currency buy/sell commission
Fed Funds Rate (USD)
IBR (COP)
Government bonds
Months
Historical standard deviation
E.g.: 1,000,000 USD
Arbitrage Analysis
Theoretical Forward (CIP)
$0
Market-Implied Forward
$0
Rate Differential
0%
Expected Return (Uncovered, under UIP)
0%
Analyzing
Analyzing…
Calculating opportunity…
| Scenario | Future exchange rate | Return in origin currency | Gain/Loss |
|---|---|---|---|
| Calculate to see scenarios | |||
Methodology based on Covered Interest Rate Parity (CIP) for the theoretical forward, Uncovered Interest Rate Parity (UIP) for the expected return, and a log-normal model (multiplicative shock on the exchange-rate level) for the volatility bands.
Criteriofinanciero.com.co
Criteriofinanciero.com.co
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