国际财务管理知识分析(英文版).pptx

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1、INTERNATIONALFINANCIALMANAGEMENTEUN / RESNICKSecond Edition5Chapter FiveInternational Parity Relationships & Forecasting Exchange RatesChapter Objective:This chapter examines several key international parity relationships, such as interest rate parity and purchasing power parity. Chapter OutlinelInt

2、erest Rate ParitylPurchasing Power ParitylThe Fisher EffectslForecasting Exchange Rates1Chapter OutlinelInterest Rate ParitynCovered Interest ArbitragenIRP and Exchange Rate DeterminationnReasons for Deviations from IRPlPurchasing Power ParitylThe Fisher EffectslForecasting Exchange Rates2Chapter Ou

3、tlinelInterest Rate ParitylPurchasing Power ParitynPPP Deviations and the Real Exchange RatenEvidence on Purchasing Power ParitylThe Fisher EffectslForecasting Exchange Rates3Chapter OutlinelInterest Rate ParitylPurchasing Power ParitylThe Fisher EffectslForecasting Exchange Rates4Chapter OutlinelIn

4、terest Rate ParitylPurchasing Power ParitylThe Fisher EffectslForecasting Exchange RatesnEfficient Market ApproachnFundamental ApproachnTechnical ApproachnPerformance of the Forecasters5Interest Rate ParitylInterest Rate Parity DefinedlCovered Interest ArbitragelInterest Rate Parity & Exchange Rate

5、DeterminationlReasons for Deviations from Interest Rate Parity 6Interest Rate Parity DefinedlIRP is an arbitrage condition.lIf IRP did not hold, then it would be possible for an astute trader to make unlimited amounts of money exploiting the arbitrage opportunity.lSince we dont typically observe per

6、sistent arbitrage conditions, we can safely assume that IRP holds.7Interest Rate Parity DefinedSuppose you have $100,000 to invest for one year.You can either 1.invest in the U.S. at i$. Future value = $100,000(1 + ius) 2.trade your dollars for yen at the spot rate, invest in Japan at i and hedge yo

7、ur exchange rate risk by selling the future value of the Japanese investment forward. The future value = $100,000(F/S)(1 + i) Since both of these investments have the same risk, they must have the same future valueotherwise an arbitrage would exist.(F/S)(1 + i) = (1 + ius) 8Interest Rate Parity Defi

8、nedFormally, (F/S)(1 + i) = (1 + ius) or if you prefer,SFii$11IRP is sometimes approximated as S(F- S) ) -i(i$9IRP and Covered Interest ArbitrageIf IRP failed to hold, an arbitrage would exist. Its easiest to see this in the form of an example.Consider the following set of foreign and domestic inter

9、est rates and spot and forward exchange rates.Spot exchange rateS($/)=$1.25/360-day forward rateF360($/)=$1.20/U.S. discount ratei$=7.10%British discount rate i =11.56%10IRP and Covered Interest ArbitrageA trader with $1,000 to invest could invest in the U.S., in one year his investment will be wort

10、h $1,071 = $1,000(1+ i$) = $1,000(1.071)Alternatively, this trader could exchange $1,000 for 800 at the prevailing spot rate, (note that 800 = $1,000$1.25/) invest 800 at i = 11.56% for one year to achieve 892.48. Translate 892.48 back into dollars at F360($/) = $1.20/, the 892.48 will be exactly $1

11、,071.11According to IRP only one 360-day forward rate, F360($/), can exist. It must be the case that F360($/) = $1.20/Why? If F360($/) $1.20/, an astute trader could make money with one of the following strategies:Interest Rate Parity & Exchange Rate Determination12Arbitrage Strategy IIf F360($/) $1

12、.20/ i. Borrow $1,000 at t = 0 at i$ = 7.1%.ii. Exchange $1,000 for 800 at the prevailing spot rate, (note that 800 = $1,000$1.25/) invest 800 at 11.56% (i) for one year to achieve 892.48iii. Translate 892.48 back into dollars, if F360($/) $1.20/ , 892.48 will be more than enough to repay your dolla

13、r obligation of $1,071.13Arbitrage Strategy IIIf F360($/) $1.20/ i. Borrow 800 at t = 0 at i= 11.56% .ii. Exchange 800 for $1,000 at the prevailing spot rate, invest $1,000 at 7.1% for one year to achieve $1,071.iii. Translate $1,071 back into pounds, if F360($/) $1.20/ , $1,071 will be more than en

14、ough to repay your obligation of 892.48.14You are a U.S. importer of British woolens and have just ordered next years inventory. Payment of 100M is due in one year.IRP and Hedging Currency RiskIRP implies that there are two ways that you fix the cash outflowa)Put yourself in a position that delivers

15、 100M in one yeara long forward contract on the pound. You will pay (100M)(1.2/) = $120Mb)Form a forward market hedge as shown below.Spot exchange rateS($/)=$1.25/360-day forward rateF360($/)=$1.20/U.S. discount ratei$=7.10%British discount rate i =11.56%15IRP and a Forward Market Hedge To form a fo

16、rward market hedge:Borrow $112.05 million in the U.S. (in one year you will owe $120 million).Translate $112.05 million into pounds at the spot rate S($/) = $1.25/ to receive 89.64 million.Invest 89.64 million in the UK at i = 11.56% for one year.In one year your investment will have grown to 100 mi

17、llionexactly enough to pay your supplier.16Forward Market Hedge Where do the numbers come from? We owe our supplier 100 million in one yearso we know that we need to have an investment with a future value of 100 million. Since i = 11.56% we need to invest 89.64 million at the start of the year.How m

18、any dollars will it take to acquire 89.64 million at the start of the year if S($/) = $1.25/?1.1156 100 89.641.25 $1.0089.64$112.05 17Reasons for Deviations from IRPlTransactions CostsnThe interest rate available to an arbitrageur for borrowing, ib,may exceed the rate he can lend at, il.nThere may b

19、e bid-ask spreads to overcome, Fb/Sa F/S nThus(Fb/Sa)(1 + il) (1 + i b) 0lCapital ControlsnGovernments sometimes restrict import and export of money through taxes or outright bans.18Purchasing Power ParitylPurchasing Power Parity and Exchange Rate DeterminationlPPP Deviations and the Real Exchange R

20、atelEvidence on PPP19Purchasing Power Parity and Exchange Rate DeterminationlThe exchange rate between two currencies should equal the ratio of the countries price levels. S($/) = P$ PlRelative PPP states that the rate of change in an exchange rate is equal to the differences in the rates of inflati

21、on. e = $ - lIf U.S. inflation is 5% and U.K. inflation is 8%, the pound should depreciate by 3%.20)1)(1 (1$eqPPP Deviations and the Real Exchange RateThe real exchange rate is If PPP holds, (1 + e) = (1 + $)/(1 + ), then q = 1.If q 1 competitiveness of domestic country deteriorates with currency de

22、preciations.21Evidence on PPPlPPP probably doesnt hold precisely in the real world for a variety of reasons.nHaircuts cost 10 times as much in the developed world as in the developing world.nFilm, on the other hand, is a highly standardized commodity that is actively traded across borders.nShipping

23、costs, as well as tariffs and quotas can lead to deviations from PPP.lPPP-determined exchange rates still provide a valuable benchmark.22The Fisher EffectslAn increase (decrease) in the expected rate of inflation will cause a proportionate increase (decrease) in the interest rate in the country.lFor

24、 the U.S., the Fisher effect is written as:i$ = $ + E($)Where $ is the equilibrium expected “real” U.S. interest rateE($) is the expected rate of U.S. inflationi$ is the equilibrium expected nominal U.S. interest rate23International Fisher EffectIf the Fisher effect holds in the U.S. i$ = $ + E($)an

25、d the Fisher effect holds in Japan,i = + E() and if the real rates are the same in each country$ = then we get the International Fisher EffectE(e) = i$ - i .24International Fisher EffectIf the International Fisher Effect holds, E(e) = i$ - i and if IRP also holds S(F - S) E(e) S(F- S) -ii$then forwa

26、rd parity holds.25Equilibrium Exchange Rate RelationshipsS(F - S)E(e) )-i(i$ - IRPPPPFEFRPPPIFEFP26Forecasting Exchange RateslEfficient Markets ApproachlFundamental ApproachlTechnical ApproachlPerformance of the Forecasters27Efficient Markets ApproachlFinancial Markets are efficient if prices reflec

27、t all available and relevant information.lIf this is so, exchange rates will only change when new information arrives, thus:St = ESt+1 andFt = ESt+1| ItlPredicting exchange rates using the efficient markets approach is affordable and is hard to beat.28Fundamental ApproachlInvolves econometrics to de

28、velop models that use a variety of explanatory variables. This involves three steps:nstep 1: Estimate the structural model.nstep 2: Estimate future parameter values.nstep 3: Use the model to develop forecasts.lThe downside is that fundamental models do not work any better than the forward rate model

29、 or the random walk model.29Technical ApproachlTechnical analysis looks for patterns in the past behavior of exchange rates.lClearly it is based upon the premise that history repeats itself.lThus it is at odds with the EMH30Performance of the ForecasterslForecasting is difficult, especially with regard to the future. lAs a whole, forecasters cannot do a better job of forecasting future exchange rates than the forward rate.lThe founder of Forbes Magazine once said: “You can make more money selling advice than following it.”31End Chapter Five32