A covered interest rate parity is understood as a "no-arbitrage" condition. Simply put, this means that investors will be unable to achieve zero-risk profits simply by exchanging currencies and taking advantage of discrepancies in exchange rates. Covered Interest Rate Parity vs. Uncovered Interest Rate Parity 1. Future rates. Covered interest rate parity involves the use of future rates or forward rates when assessing exchange rates, which also makes potential hedging Hedging Hedging is a financial strategy that should be understood and used by investors because of the advantages it offers.