Like all swaps, a cross-credit exchange can be replicated with accounting instruments, in this case with money market deposits or FRNs denominated in different currencies. This explains the need for a principal exchange at maturity, since all loans and deposits must be repaid even at maturity.33 The empirical rejection of the impartiality hypothesis is a well-known headache among financial researchers. Empirical evidence of co-integration between the attack rate and the future spot rate is mixed.    Researchers have published papers demonstrating the empirical failure of the hypothesis by performing regression analyses of changes in spot exchange rates on term premiums and finding negative slope coefficients.  These researchers offer many reasons for such failure. One justification focuses on easing risk neutrality, while rational expectations are maintained, so that there may be a foreign exchange risk premium that can account for differences between the futures price and the future spot rate.  The next equation is interest rate parity, a condition in which investors eliminate exchange rate risk (unexpected exchange rate movements) through the use of a futures contract – foreign exchange risk is effectively hedged. Under this condition, a domestic investor would obtain the same returns by investing in domestic assets or converting the currency at the spot exchange rate, investing in foreign currency investments in a country where the interest rate is different, and changing the currency into the national currency at the negotiated exchange rate. Investors will be indifferent to the interest rates of deposits in these countries because of the equilibrium resulting from foreign exchange transactions. The condition does not allow arbitrage because the yield on domestic deposits, 1 + id, is equal to the return on foreign deposits, [F/S] (1 + if).
If these two returns were not offset by the use of a futures contract, there would be a potential possibility of arbitrage in which, for example, in the country where the interest rate is lower, an investor could borrow currency, convert it into foreign currency at the current spot exchange rate and invest abroad with the higher interest rate.  Futures and futures are similar in many ways: both include the agreement to buy and sell assets at a future date, and both have prices derived from an underlying.