Arbitrage ensures that covered interest parity holds. The condition is central to price foreign exchange forwards and … interbank lending rates, and reflects the efficient functioning of markets. Normally, deviations from arbitrage, if any, last … seconds and reach a few basis points. After the Lehman bankruptcy, instead, arbitrage profits were large, persisted for months …

. These results indicate a breakdown of arbitrage transactions in the international capital markets during the crisis that …

in Mexico, and it was robust to including arbitrage funding and foreign exchange transaction costs in the regression …