Cross-currency repos offer riskless solution to interest rate parity puzzle.
Deviations from covered interest rate parity can be minimized using cross-currency repo rates instead of standard interest rates. This is because foreign exchange swaps and cross-currency repos have similar risk profiles with low counterparty credit risk but include a relative funding liquidity premium. By using cross-currency repo transactions, CIP deviations can be exploited without risk, unlike with other interest rates.