Thus, the interest rate parity (IRP) is an arbitrage condition stating that the future dollar proceeds from investing in two equivalent (and risk-free) investments must be the same. Alternatively...

Thus, the interest rate parity (IRP) is an arbitrage condition stating that the future dollar proceeds from investing in two equivalent (and risk-free) investments must be the same. Alternatively stated, IRP holds that hedged returns from investing in different currencies should be the same regardless of the level of interest rates.