Chapter 4 Research Methodology
|
|
- Julian Jordan
- 5 years ago
- Views:
Transcription
1 Chapter 4 Research Methodology 4.1 Introduction An exchange rate (also known as a foreign-exchange rate, forex rate, FX rate or Agio) between two currencies is the rate at which one currency will be exchanged for another. The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. There are several methods and techniques available through which exchange rate is a measure like, Purchasing power parity, interest rate parity, fisher effect, international fisher effects. Foreign exchange risk also exists when the foreign subsidiary of a firm maintains financial statements in a currency other than the reporting currency of the consolidated entity. The risk is that there may be an adverse movement in the exchange rate of the denomination currency in relation to the base currency before the date when the transaction is completed. Investors and businesses exporting or importing goods and services or making foreign investments have an exchange rate risk which can have severe financial consequences; but steps can be taken to manage (i.e., reduce) the risk. Firms may adopt alternative strategies to financial hedging for managing their economic or operating exposure, by carefully selecting production sites with a mind for lowering costs, using a policy of flexible sourcing in its supply chain management, diversifying its export market across a greater number of countries, or by implementing strong research and development activities and differentiating its products in pursuit of greater inelasticity and less foreign exchange risk exposure. 4.2 Research Methodology Exchange Rates are very important for any country as they determine the level of imports and exports. If a domestic currency appreciates with respect to a foreign currency, imported goods will be cheaper in the domestic market and local companies would find
2 that their foreign competitor's goods become more attractive to customers. If the country has a strong currency then its goods become more expensive in the international market, which results in lost competitiveness. This is the reason that China, despite much pressure from the United States, is not letting its Yuan appreciated. Exchange rates are extremely important for a trading economy such as the BRICS. There are several reasons for this, including: Exchange rates represent a cost to firms, which arises when commission is paid on the exchange of one currency for another. Exchange rate changes create a risk to those firms that hold assets in currencies other than Nation Currency. Exchange rates affect the price of export to form a significant part of aggregate demand, and the price of imports with that the balance of payments. Generally nation economy strength is determined on the basis of exchange rate valuation. If nation exchange rate likely appreciates, this nation has sound economy. That s why developed nation exchange rate is always appreciating compare to developing nation. There are lots of factors influence exchange rate like, demand and supply of exchange rate, inflation, interest rate, balance of payment, stock market, speculator, GDP, GNP etc. 4.3 Statement of the Problem An international exchange rate, also known as a foreign exchange (FX) rate, is the price of one country's currency in terms of another country's currency. Foreign exchange rates are relative and are expressed as the value of one currency compared to another. When selling products internationally, the exchange rate for the two trading countries' currencies is an important factor. Foreign exchange rates, in fact, are one of the most important determinants of a countries relative level of economic health, ranking just after interest rates and inflation. A number of factors influence exchange rates. These include all of the following: Relative rates of inflation Comparative interest rates
3 Growth of domestic money supply Size and trend of a country's balance of payments Dependency on outside energy sources Central bank intervention Economic growth (as measured by the gross national product) Exchange rate is most important factors for the trading countries and developing countries because their economies mostly depend on the foreign trade and transaction. That s why in research select BRICS countries because these countries are developing countries and their economy depend on the foreign trade, FDI (Foreign Direct Investment) and FII (Foreign Institutional Investments) and BOP (Balance of Payment). The BRIC [Brazil, Russia, India and China] idea was first conceived in 2001 by Goldman Sachs as part of an economic modeling exercise to forecast global economic trends over the next half century; On the bases of Common characteristics are large, fast-growing economies all developing or newly industrialized countries. BRIC Foreign Ministers at their meeting in New York on 21st September 2010 agreed that South Africa may be invited to join BRIC. Accordingly, South Africa was invited to attend the 3rd BRICS Summit in Sanya on 14 April These BRICS countries main focus on export import trade and promote industrialization. That s why exchange rate is a keep factors for BRICS country. 4.4 Objectives of Study Main objectives: To find out which factor influence exchange rate in BRICS country and How to manage exchange rate fluctuation in BRICS country? Sub objectives: To study which types of flexible exchange rate method apply in BRICS country?
4 On this objectives find out which flexible exchange rate method manage exchange rate in their own nation. Which types of the government intervention are generated in flexible exchange rate? To check validity of exchange rate parity theories in BRICS country. In advance 5 parity theories are find out and which said inflation and interest rate are major factor to decide the exchange rate movement. Through theses check validity of exchange rate parity theories in BRICS country. PPP (purchasing Power Parity) FE (Fisher Effect) IFE (International Fisher Effect) IRP (Interest rate Parity) In real life these theories are really worked or not. To measures exchange rate fluctuation and risk for Company and Country. Exchange rate risk measures in company on the bases of relationship between market value of share and exchange rate movements. For country, to find out relationship between exchange rate movement and change in FII and Balance of Payments. To manage exchange rate exposure for company and country. For management of MNC exchange rate exposure use hedging techniques. And exchange rate hedge through the Commodity market and currency derivatives market. In BRICS country, Government policy is used for hedging. 4.5 Significance of Study To assists the business in making the international decision, which involve transactions in multi-currency. It focuses on the condition of the market, and evaluates whether the economy is truly governed by market forces, or else there are some interventions hindering the free flow of transactions in the economy.
5 To know about triangular arbitrage. To helpful in future predicted exchange rate. To helpful for offsetting their assets It is useful to MNC firm which make multilateral trade on credit base, because in which several exchange rate risk is associated. Investor also gets idea how to hedge and protects his investments in another country. 4.6 Sample Design Research design is the plan and structure of investigation so as to obtain the answer to research questions. The plan is the overall program of the research. It includes an outline of what the investigation will do from writing the problems and their implication to final analysis of data. Earlier part of my project is exploratory research design as the topic demands exploration the various terminologies in the exchange rate. While exploration I will come to know about the various concepts associated with exchange rate determination. Even collection of data also demands exploration through various books and websites. Then descriptive research method is adopted to find out the degree of causal relationship between the dependent variable and independent variable in respective parity condition model. Lastly again the reason to the functioning and none functioning were explored. Try to create one model through which easily predict exchange rate and minimize exchange rate risk with the help of contractual hedge. 4.7 Sample Size Selection for Nation There are 196 countries in world, among them population researcher has select only 5 countries (Brazil, Russia, China, India and South Africa). BRICS countries are developing countries and this idea was first conceived in 2001 by Goldman Sachs as part of an economic modeling exercise to forecast global economic trends over the next half
6 century; the acronym BRIC was first used in 2001 by Goldman Sachs in their Global. On the bases of Common characteristics are large, fast-growing economies all developing or newly industrialized countries. The four original BRIC countries comprise more than 2.8 billion people or 40 percent of the world s population, cover more than a quarter of the world s land area over three continents, and account for more than 25 percent of global GDP. In 2010 South Africa was added in BRIC countries because it has lots of natural resources and faster growth rate. Selection of Time Period Time duration after 1991, in 1991 liberalization policy was introduced in India. After the introduction of the liberalization policy MNCs were promoted, and increase global trade. As per all those changes exchange rate play a vital role in economy. Therefore time duration for data collection is after January 2005 to August Sample Selection Techniques Non probability judgmental sampling technique is used, because BRICS countries selections also depend on as per convenience and data collection period after January 2005 to August Data Collection Tools Secondary data: It is a second user data and reused data from various source of data. (Newspaper, Magazine, Journals, Research Report and Books) and electronic media (Websites, e-journals and data bases). The details are given as references at the end of the thesis Sources of Data and Form of Data Secondary data collection method is used. Time duration: Monthly January 2005 to August 2015
7 Types of data Characteristics of data Source of data Nominal Interest rate Treasury bill Country s central bank Exchange rate European Currency Quotation International Monetary Fund Nominal inflation rate CPI World Bank and International Monetary Fund GDP Future Rate European currency Quotation Trading Economy and country economy NSE Currency Future MCX Currency Future Monthly exchange rates between the US Dollar against Brazil Real, Russia Rable, Indian Rapee, China Yuan (Renminbi) And South Africa rand between the years January 2005 to august The data collected material has been revised by calculating the percentage nominal interest differential and the percentage exchange rate change for different quarters and country pair, where the US is the home country. The nominal interest differential has been computed by taking the US nominal interest rate minus foreign nominal interest rate divided by one plus the foreign nominal interest rate. Exchange rate has been computed by taking the exchange rate at time t+1 minus the exchange rate at time t, divided by the exchange rate at time t Statistical Tools Applied For effective data analysis and to derive the needed results the following financial and statistical tools were applied in this study: Trend analysis, Summary Statistics (Mean & Standard Deviation), Co - efficient of Variance, Multiple Regression analysis, Pearson s Correlation analysis, Adjusted R 2, intercept, beta valuation and Paired t- test.
8 Trend analysis is an important tool of horizontal financial analysis. This method determines the direction upwards or downwards and involves the computation of the percentage relationship. Measures of Summary statistics had been applied to measure mean and Standard Deviation between the time series data used for analyzing the exchange rate in BRICS countries. Karl Person s Correlation has been applied to analyze the correlation between the exchange rate and interest rate and inflation variable, also find out the exchange rate movement and stock price movement in BRICS countries and India s FII s and BOP are variated due to exchange rate change. With the support of Multiple Regression Analysis, a research model has been framed to measure the prime determinants of exchange rate movement in Brazil, Russia, India, China and South Africa. A line in a two dimensional or two-variable space is defined by the equation Y=a+b*X; in full text: the Y variable can be expressed in terms of a constant (a) and a slope (b) times the X variable. The constant is also referred to as the intercept, and the slope as the regression coefficient or B coefficient. Determinants of exchange rate parity theory: Where, α is constant and β is coefficients to estimate, and e is the error term Purchasing Power Parity Theory An economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power. Equation of Purchasing Power Parity (St+1 St)= (i.h,t i.f,t) St (1+ i.f,t) i.h,t = Inflation Rate Of Home Country USA, at time t i.f,t = Inflation Rate Of Foreign Country,at time t St = Spot Exchange rate At Time t
9 Fisher Effect Fisher effect says that currencies with high rates of inflation should bear higher rate than currencies with lower rate of inflation. (Shapiro 2002, 161) Equation of Fisher Effect (1 + r h,t) = ( 1+ E(I h,t)) (1+ r f,t) (1+ E(I f,t)) International Fisher Effect International Fisher Effect is the counter part of the fisher effect. It can be seen as a combination of the generalized version of the fisher effect and relative version of the PPP. (St+1 St) = (i.h,t i.f,t) and (1 + r h,t) = ( 1+ E(I h,t)) St (1+ i.f,t) (1+ r f,t) (1+ E(I f,t)) By the combination of two equations we get international fisher relation (St+1 St) = (r.h,t r.f,t) St (1+ r f,t) The international fisher effect shows the relationship between the percentage change in the spot exchange rate over time and differential between comparable interest rate in different nominal capital market (MadhuVij 2003, 214) Interest Rate Parity Interest rate parity say the currency of the country with lower interest rate should be at a forward premium in term of the currency of the country with the higher rate. The interest differential should be equal to the forward differential when this condition is fulfill that time create a interest rate parity. (Shapiro, 2002, 50) According to IRP F/S = (1+ rd) / (1+r f) Investor speculating on the future spot rate interested in making a profit would move capital from countries with low interest rate to countries with high interest rates.
10 4.12 Hypothesis for the Test The null hypotheses- thus hypotheses states that there is no association between the variable being tested. The alternative hypotheses this hypothesis states that there is significant association between the variable that are being tested and that the results obtained did not occur by chance. Following hypotheses and sub hypotheses were tested for the study purpose: H0: α = 0, β = 1 will be rejected at 5% confidence interval if p-value is less than P- Value are shows acceptance level. Hypothesis will be rejected at 5% confidence interval if the p-value is less than The null hypothesis is rejected H1: Inflation is significant and negatively related with exchange rate H2: Inflation is significant and positively related with interest rate. H3: Interest rate is significant and positively related with future exchange rate. H4: Cost of transaction is not increase due to exchange rate fluctuation Limitation of Study Monthly data are used, may be the parity condition would work for more time period. Bid- Ask spread is ignored Brokerage charge and other transaction costs are ignored. Sometime particular strategies are not works under certain circumstances. Hedging strategies are also expensive.
11 4.14 Future Scope With the help of this research, researcher can find out other variable factors (political, economic, internal war and any specific events) through which exchange rate fluctuated. To introduce one common currency for BRICS country, with the help of this currency promote international trade between members and other member s countries. Company also calculates operating and translation exposure due to exchange rate change, and maintain their assets and liabilities ratio.
2. Discuss the implications of the interest rate parity for the exchange rate determination.
CHAPTER 5 INTERNATIONAL PARITY RELATIONSHIPS AND FORECASTING FOREIGN EXCHANGE RELATIONSHIPS SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Give a full definition
More informationControllers Guide to Multinational Financial Management Chapter 1:
Controllers Guide to Multinational Financial Management Chapter 1: The What and Why of Multinational Finance 1. Recognize some special features of a multinational corporation (MNC). 2. Distinguish the
More informationChapter 9. Forecasting Exchange Rates. Lecture Outline. Why Firms Forecast Exchange Rates
Chapter 9 Forecasting Exchange Rates Lecture Outline Why Firms Forecast Exchange Rates Forecasting Techniques Technical Forecasting Fundamental Forecasting Market-Based Forecasting Mixed Forecasting Guidelines
More informationRelationships among Exchange Rates, Inflation, and Interest Rates
Relationships among Exchange Rates, Inflation, and Interest Rates Chapter Objectives To explain the purchasing power parity (PPP) and international Fisher effect (IFE) theories, and their implications
More informationArabian Group of Journals (AGJ) Accounting Research. International Journal of Accounting Research (IJAR) Webpage:
Arabian Group of Journals (AGJ) Accounting Research International Journal of Accounting Research (IJAR) Webpage: www.arabianjbmr.com/ijar_index.php ISSN: 2311-326X EXCHANGE RATE FLUCTUATIONS MAJOR FACTOR
More informationAgenda. Learning Objectives. Chapter 19. International Business Finance. Learning Objectives Principles Used in This Chapter
Chapter 19 International Business Finance Agenda Learning Objectives Principles Used in This Chapter 1. Foreign Exchange Markets and Currency Exchange Rates 2. Interest Rate and Purchasing-Power Parity
More informationFinancial Management in IB. Foreign Exchange Exposure
Financial Management in IB Foreign Exchange Exposure 1 Exchange Rate Risk Exchange rate risk can be defined as the risk that a company s performance will be negatively affected by exchange rate movements.
More informationMCQ on International Finance
MCQ on International Finance 1. If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with a) international monetary credits. b) dollars. c) yuan,
More informationInternational Finance multiple-choice questions
International Finance multiple-choice questions 1. Spears Co. will receive SF1,000,000 in 30 days. Use the following information to determine the total dollar amount received (after accounting for the
More informationFutures and Forward Markets
Futures and Forward Markets (Text reference: Chapters 19, 21.4) background hedging and speculation optimal hedge ratio forward and futures prices futures prices and expected spot prices stock index futures
More informationLess Reliable International Parity Conditions
The International Parity Conditions The Law of One Price Interest Rate Parity Less Reliable International Parity Conditions The Real Exchange Rate 1 The International Parity Conditions Though this be madness,
More informationReplies to one minute memos, 9/21/03
Replies to one minute memos, 9/21/03 Dear Students, Thank you for asking these great questions. The answer to my question (what is the difference b/n the covered & uncovered interest rate arbitrage? If
More informationCapital & Money Markets
Πανεπιστήμιο Πειραιώς, Τμήμα Τραπεζικής και Χρηματοοικονομικής Διοικητικής Μεταπτυχιακό Πρόγραμμα «Χρηματοοικονομική και Τραπεζική Διοικητική» Capital & Money Markets Section 1 Foreign Exchange Markets
More informationIntroduction and Research Design
Introduction and Research Design CHAPTER I INTRODUCTION AND RESEARCH DESIGN 1.1 Introduction Foreign Direct Investment (FDI) is the life blood of International Business and the barometer of a nation s
More informationUniversity of Siegen
University of Siegen Faculty of Economic Disciplines, Department of economics Univ. Prof. Dr. Jan Franke-Viebach Seminar Risk and Finance Summer Semester 2008 Topic 4: Hedging with currency futures Name
More informationEconomic Growth and Development Prof. Rajashree Bedamatta Department of Humanities and Social Sciences Indian Institute of Technology, Guwahati
Economic Growth and Development Prof. Rajashree Bedamatta Department of Humanities and Social Sciences Indian Institute of Technology, Guwahati Lecture 01 Concepts of Economic Growth Hello and welcome
More informationA Rising Tide Lifts All Boats
Global Journal of Management and Business Research Marketing Volume 13 Issue 3 Version 1.0 Year 2013 Type: Double Blind Peer Reviewed International Research Journal Publisher: Global Journals Inc. (USA)
More informationMadura: International Financial Management Chapter 8
Madura: International Financial Management Chapter Chapter Relationships Between Inflation, Interest Rates, and Exchange Rates Chapter Objectives To explain the theories of purchasing power parity (PPP)
More informationgement JEFF MADURA "Fldfida'J&lantic University .,. ;. O r> Ll.l K 1 i UNIVERSnAT LIECHTENSTEIN Blbllothett SOUTH-WESTERN CENGAGE Learning- " ^ si-
f f >' ' '^11 ABRIDGED 10TH EDITION gement JEFF MADURA "Fldfida'J&lantic University Ll.l K 1 i.,. ;. O r> UNIVERSnAT LIECHTENSTEIN Blbllothett /, " ^ si- -A- SOUTH-WESTERN CENGAGE Learning- Australia Brazil
More informationCorrelation between Inflation Rates and Currency Values
Parkland College A with Honors Projects Honors Program 2015 Correlation between Inflation Rates and Currency Values Valeria Rohde Parkland College Recommended Citation Rohde, Valeria, "Correlation between
More informationINTERNATIONAL FINANCE & FINANCIAL MARKETS MAF306 EXAM SUMMARY NOTES
INTERNATIONAL FINANCE & FINANCIAL MARKETS MAF306 EXAM SUMMARY NOTES TOPIC 1 - INTRODUCTION 4 GLOBAL OPERATION 4 TYPES OF MULTI-NATIONAL CORPORATIONS (MNC) 4 WHY FOREIGN DIRECT INVESTMENT (FDI) 4 GLOBALIZATION
More informationImpact of Unemployment and GDP on Inflation: Imperial study of Pakistan s Economy
International Journal of Current Research in Multidisciplinary (IJCRM) ISSN: 2456-0979 Vol. 2, No. 6, (July 17), pp. 01-10 Impact of Unemployment and GDP on Inflation: Imperial study of Pakistan s Economy
More informationChapter 15. The Foreign Exchange Market. Chapter Preview
Chapter 15 The Foreign Exchange Market Chapter Preview In the mid-1980s, American businesses became less competitive relative to their foreign counterparts. By the 2000s, though, competitiveness increased.
More informationA Relative Study of Stock Market Returns of BRICS Economies
IOSR Journal of Business and Management (IOSR-JBM) e-issn: 2278-487X, p-issn: 2319-7668 PP 41-45 www.iosrjournals.org A Relative Study of Stock Market Returns of BRICS Economies B N S S Kiranmai MBA I
More informationCapital Budgeting in Global Markets
Capital Budgeting in Global Markets Fall 2013 Stephen Sapp Yes, our chief analyst is recommending further investments in the new year. 1 Introduction Capital budgeting is the process of determining which
More informationBachelor Thesis Finance
Bachelor Thesis Finance What is the influence of the FED and ECB announcements in recent years on the eurodollar exchange rate and does the state of the economy affect this influence? Lieke van der Horst
More informationThe Vasicek adjustment to beta estimates in the Capital Asset Pricing Model
The Vasicek adjustment to beta estimates in the Capital Asset Pricing Model 17 June 2013 Contents 1. Preparation of this report... 1 2. Executive summary... 2 3. Issue and evaluation approach... 4 3.1.
More informationEmpirical Evidence of International Fisher Effect in Bangladesh with India and China
Empirical Evidence of International Fisher Effect in Bangladesh with India and China Md. Mahmudul Alam* PhD Research Fellow Institute for Environment and Development (LESTARI) National University of Malaysia,
More informationECO 328 SUMMER Sample Questions Topics I.1-3. I.1 National Income Accounting and the Balance of Payments
ECO 328 SUMMER 2004--Sample Questions Topics I.1-3 I.1 National Income Accounting and the Balance of Payments 1. National income equals GNP A. less depreciation, less net unilateral transfers, less indirect
More informationThe Effect of Exchange Rate Volatility on Aggregate Trade Flows for the BRICS Nations
The Park Place Economist Volume 26 Issue 1 Article 12 2018 The Effect of Exchange Rate Volatility on Aggregate Trade Flows for the BRICS Nations Christopher Collins ccollin2@iwu.edu Recommended Citation
More informationCovered Interest Rate Parity: The USD and CNY
Keiser University From the SelectedWorks of Kimberly D Scott Fall November 29, 2015 Covered Interest Rate Parity: The USD and CNY Kimberly D Scott Available at: https://works.bepress.com/kimberly_scott/5/
More informationParity Conditions in International Finance and Currency Forecasting. Chapter 4
Parity Conditions in International Finance and Currency Forecasting Chapter 4 ١ ARBITRAGE AND THE LAW OF ONE PRICE Five Parity Conditions Result From Arbitrage Activities 1. Purchasing Power Parity (PPP)
More informationJournal of Radix International Educational and Research Consortium 1 P a g e
A Journal of Radix International Educational and Research Consortium RIJEB RADIX INTERNATIONAL JOURNAL OF ECONOMICS & BUSINESS MANAGEMENT NSE- TRADING OF CURRENCY FUTURES POONAM ABSTRACT The introduction
More information1 trillion units * ($1 per unit) = $500 billion * 2
Under the strict monetarist view, real interest rates and money supply are assumed to be independent. Under this assumption, inflation does not affect real rates. Nevertheless, nominal rates, R, are obviously
More informationSTUDY HINTS FOR THE LEVEL I CFA EXAM
STUDY HINTS FOR THE LEVEL I CFA EXAM The Level I CFA exam is a multiple choice test consisting of 240 multiple choice questions, half of which will be given in the morning session and half of which will
More informationBBM2153 Financial Markets and Institutions Prepared by Dr Khairul Anuar
BBM2153 Financial Markets and Institutions Prepared by Dr Khairul Anuar L8: The Foreign Exchange Market www. notes638.wordpress.com Copyright 2015 Pearson Education, Ltd. All rights reserved. 8-1 Chapter
More informationForeign Exchange Markets: Key Institutional Features (cont)
Foreign Exchange Markets FOREIGN EXCHANGE MARKETS Professor Anant Sundaram AGENDA Basic characteristics of FX markets: Institutional features Spot markets Forward markets Appreciation, depreciation, premium,
More informationin equilibrium, are supposed to hold across international markets. Covered Interest Rate Parity Purchasing Power Parity y( (also called the Law of
Week 4 The Parities The Parities There are three fundamental parity conditions that, in equilibrium, are supposed to hold across international markets. Covered Interest Rate Parity Purchasing Power Parity
More informationINTRODUCTION TO EXCHANGE RATES AND THE FOREIGN EXCHANGE MARKET
INTRODUCTION TO EXCHANGE RATES AND THE FOREIGN EXCHANGE MARKET 13 1 Exchange Rate Essentials 2 Exchange Rates in Practice 3 The Market for Foreign Exchange 4 Arbitrage and Spot Exchange Rates 5 Arbitrage
More informationChapter 10. The Foreign Exchange Market
Chapter 10 The Foreign Exchange Market Why Is The Foreign Exchange Market Important? The foreign exchange market 1. is used to convert the currency of one country into the currency of another 2. provides
More informationQuoting an exchange rate. The exchange rate. Examples of appreciation. Currency appreciation. Currency depreciation. Examples of depreciation
The exchange rate The nominal exchange rate (or, for short, exchange rate) between two currencies is the price of one currency in terms of the other. It allows domestic purchasing power to be spent abroad.
More informationGuide to Financial Management Course Number: 6431
Guide to Financial Management Course Number: 6431 Test Questions: 1. Objectives of managerial finance do not include: A. Employee profits. B. Stockholders wealth maximization. C. Profit maximization. D.
More informationIs there a significant connection between commodity prices and exchange rates?
Is there a significant connection between commodity prices and exchange rates? Preliminary Thesis Report Study programme: MSc in Business w/ Major in Finance Supervisor: Håkon Tretvoll Table of content
More informationComparative analysis of the BRICS Trade
Comparative analysis of the BRICS Trade Su Ang March 27, 2016 Abstract This article analyzes how economic growth, economic population, budget deficit, disposable income per capita and currency affect the
More informationSession 13. Exchange Rate Risk
Session 13 Exchange Rate Risk Programme : Executive Diploma in Accounting, Business & Strategy (EDABS 2017) Course : Corporate Financial Management (EDABS 202) Lecturer : Mr. Asanka Ranasinghe MBA (Colombo),
More informationSTUDY HINTS FOR THE LEVEL I CFA EXAM
STUDY HINTS FOR THE LEVEL I CFA EXAM The Level I CFA exam is a multiple choice test consisting of 240 multiple choice questions, half of which will be given in the morning session and half of which will
More informationInternational Finance Prof. A. K. Misra Department of Management Indian Institute of Technology, Kharagpur
International Finance Prof. A. K. Misra Department of Management Indian Institute of Technology, Kharagpur Lecture - 1 International Financial Environment Good morning, today we will discuss about international
More informationCLASS MATERIALS INTERNATIONAL PARITY CONDITIONS
CLASS MATERIALS INTERNATIONAL PARITY CONDITIONS ---------------------------------------------------- 1. Key Interest Rate-Exchange Rate Linkages: The Parity Framework Parity conditions are useful when
More information16. Foreign Exchange
16. Foreign Exchange Last time we introduced two new Dealer diagrams in order to help us understand our third price of money, the exchange rate, but under the special conditions of the gold standard. In
More informationCurrency Futures Trade on YieldX
JOHANNESBURG STOCK EXCHANGE YieldX Currency Futures Currency Futures Trade on YieldX Currency futures are traded on YieldX, the JSE s interest rate market. YieldX offers an efficient, electronic, automatic
More informationEcon 340. Forms of Exchange Rates. Forms of Exchange Rates. Forms of Exchange Rates. Forms of Exchange Rates. Outline: Exchange Rates
Econ 34 Lecture 13 In What Forms Are Reported? What Determines? Theories of 2 Forms of Forms of What Is an Exchange Rate? The price of one currency in terms of another Examples Recent rates for the US
More informationIntroduction to Exchange Rates and the Foreign Exchange Market
Introduction to Exchange Rates and the Foreign Exchange Market 2 1. Refer to the exchange rates given in the following table. Today One Year Ago June 25, 2010 June 25, 2009 Country Per $ Per Per Per $
More informationVolume 35, Issue 1. Thai-Ha Le RMIT University (Vietnam Campus)
Volume 35, Issue 1 Exchange rate determination in Vietnam Thai-Ha Le RMIT University (Vietnam Campus) Abstract This study investigates the determinants of the exchange rate in Vietnam and suggests policy
More informationLesson IX: Working within an International Context - Risks, Exposures and Hedging. Techniques
Lesson IX: Working within an Context - Risks, s and April 20, 2016 s Risk and Ad Hoc Table of Contents s Risk and Ad Hoc s Risk and Ad Hoc Risk vs Risk relates to the variability in the values of assets
More informationThe Effect of Exchange Rate Risk on Stock Returns in Kenya s Listed Financial Institutions
The Effect of Exchange Rate Risk on Stock Returns in Kenya s Listed Financial Institutions Loice Koskei School of Business & Economics, Africa International University,.O. Box 1670-30100 Eldoret, Kenya
More informationChina: Friend or Foe?
China: Friend or Foe? Edwin Yun A World View of Mathematics and Data Analysis by Dr. John R. Taylor, Mrs. Desiré J. Taylor and Mrs. Christina L. Turner July 17, 2010 China: Friend or Foe 1 Abstract International
More informationCOST OF CAPITAL IN INTERNATIONAL MKTS
COST OF CAPITAL IN INTERNATIONAL MKTS Capital Structure and Cost of Capital Cost of Capital - Country Risk affects discount rates - Different countries will have different risk free rates (k f ). - High
More informationCFA Level II - LOS Changes
CFA Level II - LOS Changes 2017-2018 Ethics Ethics Ethics Ethics Ethics Ethics Ethics Ethics Ethics Topic LOS Level II - 2017 (464 LOS) LOS Level II - 2018 (465 LOS) Compared 1.1.a 1.1.b 1.2.a 1.2.b 1.3.a
More informationCURRENCY RISK MANAGEMENT THROUGH CURRENCY DERIVATIVES
CURRENCY RISK MANAGEMENT THROUGH CURRENCY DERIVATIVES Dr. Dharen Kumar Pandey Inspector of Central Excise & Service Tax, Kalyaneshwari Range, Asansol - II Division Abstract Risk is as old as civilization.
More informationInternational Financial Markets Prices and Policies. Second Edition Richard M. Levich. Overview. ❿ Measuring Economic Exposure to FX Risk
International Financial Markets Prices and Policies Second Edition 2001 Richard M. Levich 16C Measuring and Managing the Risk in International Financial Positions Chap 16C, p. 1 Overview ❿ Measuring Economic
More informationDETERMINANTS OF BILATERAL TRADE BETWEEN CHINA AND YEMEN: EVIDENCE FROM VAR MODEL
International Journal of Economics, Commerce and Management United Kingdom Vol. V, Issue 5, May 2017 http://ijecm.co.uk/ ISSN 2348 0386 DETERMINANTS OF BILATERAL TRADE BETWEEN CHINA AND YEMEN: EVIDENCE
More informationFactors affecting the share price of FMCG Companies
Factors affecting the share price of FMCG Companies Authors: Dharia Dilasha, Kakadia Sachita ABSTRACT To review the factors affecting the share prices of various FMCG companies like revenues, operating
More informationApplied Econometrics and International Development. AEID.Vol. 5-3 (2005)
PURCHASING POWER PARITY BASED ON CAPITAL ACCOUNT, EXCHANGE RATE VOLATILITY AND COINTEGRATION: EVIDENCE FROM SOME DEVELOPING COUNTRIES AHMED, Mudabber * Abstract One of the most important and recurrent
More informationZhenyu Wu 1 & Maoguo Wu 1
International Journal of Economics and Finance; Vol. 10, No. 5; 2018 ISSN 1916-971X E-ISSN 1916-9728 Published by Canadian Center of Science and Education The Impact of Financial Liquidity on the Exchange
More information8: Relationships among Inflation, Interest Rates, and Exchange Rates
8: Relationships among Inflation, Interest Rates, and Exchange Rates Infl ation rates and interest rates can have a significant impact on exchange rates (as explained in Chapter 4) and therefore can infl
More informationChapter 14 Exchange Rates and the Foreign Exchange Market: An Asset Approach
Chapter 14 Exchange Rates and the Foreign Exchange Market: An Asset Approach Copyright 2015 Pearson Education, Inc. All rights reserved. 1-1 Preview The basics of exchange rates Exchange rates and the
More informationDetermining Exchange Rates. Determining Exchange Rates
Determining Exchange Rates Determining Exchange Rates Chapter Objectives To explain how exchange rate movements are measured; To explain how the equilibrium exchange rate is determined; and To examine
More informationAccountant s Guide to Financial Management - Final Exam 100 Questions 1. Objectives of managerial finance do not include:
Accountant s Guide to Financial Management - Final Exam 100 Questions 1. Objectives of managerial finance do not include: Employee profits B. Stockholders wealth maximization Profit maximization Social
More informationChapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy
Chapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy 1 Goals of Chapter 13 Two primary aspects of interdependence between economies of different nations International
More informationTesting Market Efficiency Using Lower Boundary Conditions of Indian Options Market
Testing Market Efficiency Using Lower Boundary Conditions of Indian Options Market Atul Kumar 1 and T V Raman 2 1 Pursuing Ph. D from Amity Business School 2 Associate Professor in Amity Business School,
More information100% Coverage with Practice Manual and last 12 attempts Exam Papers solved in CLASS
1 2 3 4 5 6 FOREIGN EXCHANGE RISK MANAGEMENT (FOREX) + OTC Derivative Concept No. 1: Introduction Three types of transactions in FOREX market which associates two types of risks: 1. Loans(ECB) 2. Investments
More information6 The Open Economy. This chapter:
6 The Open Economy This chapter: Balance of Payments Accounting Savings and Investment in the Open Economy Determination of the Trade Balance and the Exchange Rate Mundell Fleming model Exchange Rate Regimes
More informationBBK3273 International Finance
BBK3273 International Finance Prepared by Dr Khairul Anuar L5: International Parity Conditions www.lecturenotes638.wordpress.com Contents 1. International Arbitrage 2. Locational Arbitrage 3. Triangular
More informationA number of issues and problems in the course will require the basic knowledge of financial management that is covered in FRL 301.
FRL 353 Section 1 Multinational Financial Market CRN # 72109 Tuesday & Thursday: 10:00-11:50 a.m. Fall Quarter 2004 Building 6 Room 107 P. Sarmas www.csupomona.edu/~psarmas Catalog Description: Institutional
More information1 The Structure of the Market
The Foreign Exchange Market 1 The Structure of the Market The foreign exchange market is an example of a speculative auction market that trades the money of various countries continuously around the world.
More informationINDIAN CURRENCY FUTURES: A FINANCIAL DERIVATIVE TOOL TO HEDGE FOREX
Indian Currency Futures: A Financial Derivative Tool to Hedge Forex 37 INDIAN CURRENCY FUTURES: A FINANCIAL DERIVATIVE TOOL TO HEDGE FOREX Mrs. Nidhi Khurana* ABSTRACT Currency is highly uncertain and
More informationExchange rate: the price of one currency in terms of another. We will be using the notation E t = euro
Econ 330: Money and Banking Fall 2014, Handout 8 Chapter 17 : Foreign Exchange Market 1. Foreign Exchange Market Exchange rate: the price of one currency in terms of another. We will be using the notation
More informationRISK AND RETURN ANALYSIS OF BANKING INDUSTRY IN CAPITAL MARKETS
RISK AND RETURN ANALYSIS OF BANKING INDUSTRY IN CAPITAL MARKETS Aravind Kopparapu 1, Vineela Kakarlapudi 2, Urmila Kalluri 3 1,2,3 Student of Finance,MBA Department MVGR College of Engineering. ABSTRACT
More informationResearch on the Influencing Factors of Dollar Exchange Rate Fluctuation after Financial Crisis
2017 4th International Conference on Business, Economics and Management (BUSEM 2017) Research on the Influencing Factors of Dollar Exchange Rate Fluctuation after Financial Crisis Ruoxi Gong Majoring in
More informationNominal exchange rate
Nominal exchange rate The nominal exchange rate between two currencies is the price of one currency in terms of the other. The nominal exchange rate (or, for short, exchange rate) will be denoted by the
More informationSTATE BANK OF PAKISTAN
STATE BANK OF PAKISTAN STATISTICAL OFFICERS TRAINING SCHEME (SOTS) SAMPLE PAPER Page 1 of 7 ENGLISH Read the passage carefully and answer questions 1-2 Some interesting information has been produced from
More informationCFA Level 2 - LOS Changes
CFA Level 2 - LOS s 2014-2015 Ethics Ethics Ethics Ethics Ethics Ethics Topic LOS Level II - 2014 (477 LOS) LOS Level II - 2015 (468 LOS) Compared 1.1.a 1.1.b 1.2.a 1.2.b 1.3.a 1.3.b describe the six components
More informationGIAN JYOTI E-JOURNAL, Volume 2, Issue 3 (Jul Sep 2012) ISSN X FOREIGN INSTITUTIONAL INVESTORS AND INDIAN STOCK MARKET
FOREIGN INSTITUTIONAL INVESTORS AND INDIAN STOCK MARKET Dr Renuka Sharma 1 & Dr. Kiran Mehta 2 Abstract The investment made by FIIs in any capital market has grabbed the attention of researchers to identify
More information1 Four facts on the U.S. historical growth experience, aka the Kaldor facts
1 Four facts on the U.S. historical growth experience, aka the Kaldor facts In 1958 Nicholas Kaldor listed 4 key facts on the long-run growth experience of the US economy in the past century, which have
More informationPerception of Recognized Intermediaries about Equity Derivative Market in India
Perception of Recognized Intermediaries about Equity Derivative Market in India Dr. Ravi Kumar Gupta 1, Dr. Shalu Juneja 2, Megha Banga 3, and Dr. Anita Gupta 4 1 (Professor, Department of Management Studies,
More informationSTARRY GOLD ACADEMY , , Page 1
ICAN KNOWLEDGE LEVEL QUANTITATIVE TECHNIQUE IN BUSINESS MOCK EXAMINATION QUESTIONS FOR NOVEMBER 2016 DIET. INSTRUCTION: ATTEMPT ALL QUESTIONS IN THIS SECTION OBJECTIVE QUESTIONS Given the following sample
More informationA monthly publication from South Indian Bank. To kindle interest in economic affairs... To empower the student community...
To kindle interest in economic affairs... To empower the student community... Open YAccess www.sib.co.in ho2099@sib.co.in A monthly publication from South Indian Bank SIB STUDENTS ECONOMIC FORUM Experience
More informationExchange Rate Fluctuations Revised: January 7, 2012
The Global Economy Class Notes Exchange Rate Fluctuations Revised: January 7, 2012 Exchange rates (prices of foreign currency) are a central element of most international transactions. When Heineken sells
More informationSTRATEGIC FINANCIAL MANAGEMENT FOREX & OTC Derivatives Summary By CA. Gaurav Jain
1 SFM STRATEGIC FINANCIAL MANAGEMENT FOREX & OTC Derivatives Summary By CA. Gaurav Jain 100% Conceptual Coverage With Live Trading Session Complete Coverage of Study Material, Practice Manual & Previous
More informationImpact of FDI on Industrial Development of India
Impact of FDI on Industrial Development of India Foreign capital and technology have been playing a vital role in India s industrial development. At the time of Independence, India inherited an industrial
More informationCFA Level II - LOS Changes
CFA Level II - LOS Changes 2018-2019 Topic LOS Level II - 2018 (465 LOS) LOS Level II - 2019 (471 LOS) Compared Ethics 1.1.a describe the six components of the Code of Ethics and the seven Standards of
More informationComprehensive Project
APPENDIX A Comprehensive Project One of the best ways to gain a clear understanding of the key concepts explained in this text is to apply them directly to actual situations. This comprehensive project
More informationFinancial markets in the open economy - the interest rate parity. Exchange rates in the short run.
Financial markets in the open economy - the interest rate parity. Exchange rates in the short run. Dr hab. Joanna Siwińska-Gorzelak Foreign Exchange Markets The set of markets where foreign currencies
More informationPAPER-14: ADVANCED FINANCIAL MANAGEMENT
PAPER-14: ADVANCED FINANCIAL MANAGEMENT Board of Studies, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 LEVEL C The following table lists the learning objectives
More informationAn Empirical Investigation of the International Fisher Effect
2002:042 SHU BACHELOR S THESIS An Empirical Investigation of the International Fisher Effect EMIL SUNDQIST Social Science and Business Administration Programmes ECONOMICS PROGRAMME Department of Business
More informationCHAPTER-4 RESEARCH METHODOLOGY
CHAPTER-4 RESEARCH METHODOLOGY The research methodology of the selected topic falls in the following dimensions: 4.1. TITLE: The title of the thesis is A Study on Investors' General and Legal Awareness
More informationFinancial Management
Financial Management International Finance 1 RISK AND HEDGING In this lecture we will cover: Justification for hedging Different Types of Hedging Instruments. How to Determine Risk Exposure. Good references
More informationArbitrage is a trading strategy that exploits any profit opportunities arising from price differences.
5. ARBITRAGE AND SPOT EXCHANGE RATES 5 Arbitrage and Spot Exchange Rates Arbitrage is a trading strategy that exploits any profit opportunities arising from price differences. Arbitrage is the most basic
More informationGlobal Finance : PPP, IFE, IRP Project
Global Finance : PPP, IFE, IRP Project JRL 咨询公司 (JRL Consulting) 科技管理职场发展咨询电邮 : tech@jrleeconsulting.com 网站 : www.jrleeconsulting.com Two countries (Canada and Japan) were selected for this exercise to
More informationThe Determinants of Capital Structure: Analysis of Non Financial Firms Listed in Karachi Stock Exchange in Pakistan
Analysis of Non Financial Firms Listed in Karachi Stock Exchange in Pakistan Introduction The capital structure of a company is a particular combination of debt, equity and other sources of finance that
More information