The emergence and persistence of basis spreads in cross-currency basis swaps (CCBSs) since the global financial crisis have become a mystery in international finance, as they violate the longstanding principle of covered interest parity (CIP). We argue that the phenomenon is no mystery but...

The emergence and persistence of basis spreads in cross-currency basis swaps (CCBSs) since the global financial crisis have become a mystery in international finance, as they violate the longstanding principle of covered interest parity (CIP). We argue that the phenomenon is no mystery but...

The US Federal Reserve and the European Central Bank have adopted a number of measures, including aggressive policy rate cuts, to ease the liquidity crunch in the financial markets following the collapse of Lehman Brothers. Using high frequency spot and forward foreign exchange and interest rate...