Futures Trading Terms Glossary

INTEREST RATE PARITY

Welcome to the RJO Futures trading terms glossary. Within this glossary, you will find an expansive list of trading terms covering commodity, option, and futures trading terminology. Bookmark this section as a quick reference for definitions of trading terms as you browse the Internet and our site for more information on futures and options trading within the financial and commodities markets.

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Interest Rate Parity×

The formal theory of interest rate parity holds that under normal conditions the forward premium or discount on a currency in terms of another is directly related to the interest differential between the two countries. This theory holds only when there are unrestricted flows of international short-term capital. In reality, numerous economic and legal obstacles restrict the movement, so that actual parity is rare. See Interest Arbitrage.