According to exchange rate parity, the equilibrium exchange rate is formed through foreign exchange transactions caused by international arbitrage. When there is a difference in interest rates between the two countries, funds will flow from low-interest countries to high-interest countries for profit. However, when comparing the yields of financial assets, arbitrageurs should not only consider the yields provided by the interest rates of the two assets, but also consider the changes in the returns of the two assets due to exchange rate changes, that is, foreign exchange risk. Arbitrators often combine arbitrage with swap business to avoid exchange rate risk and ensure no loss. Due to a large number of swap foreign exchange transactions, the spot exchange rate of currencies in low-interest countries fell and the forward exchange rate rose; In countries with high interest rates, the spot exchange rate of currencies rises and the forward exchange rate falls. Forward spread refers to the difference between the exchange rate and the spot exchange rate, so that the currencies of low-interest countries will have a forward premium and the currencies of high-interest countries will have a forward discount. With the continuous arbitrage, the forward spread will continue to increase until the yields provided by the two assets are completely equal. At this time, the arbitrage activity will stop, and the forward spread is exactly equal to the spread between the two countries, that is, the interest rate parity is established. Summarize the basic viewpoints of interest rate evaluation theory: the forward spread is determined by the interest rate difference between the two countries, the currency of high interest rate countries must be discounted in the forward foreign exchange market, and the currency of low interest rate countries must be raised in the forward foreign exchange market.