第1章汇率的决定与国际平价条件.ppt

This calculation is simple when you follow Rules #1 and #2. The next slide shows what can go wrong. All the usual rules and intuition are reversed when you inadvertently think of the currency in the numerator as the asset being bought or sold. For example, the phrase “buy high and sell low” ?! is counter-intuitive, but is the correct way to go for the currency in the numerator. It is easy to remember the two most common fx quotation conventions if students follow Rule #2 place the currency of reference in the denominator . European versus American quotes for the US $ A European quote is convenient for a European because it places the foreign currency the U.S. dollar in the denominator; e.g. €1.25/$. An American quote is convenient for an American because it places the foreign currency e.g. the euro in the denominator; e.g. $0.80/€. Direct v indirect quotes for foreign currency f This convention relies on domestic-v-foreign, rather than on the U.S. dollar. A direct quote is convenient d/f for a domestic resident because it places the foreign currency in the denominator; e.g. ￥110.95/€ for a resident of Japan Indirect quotes are inconvenient f/d for a domestic resident because it places the foreign currency in the numerator; e.g. ￥110.95/€ for a European resident Neither quotation convention applies for cross-exchange-rate quotes of two foreign currencies, neither of which is the dollar. Each dealer hopes to make a profit by buying at their bid and selling at their offer price, taking their profit on the bid-ask spread. In this example, there is an arbitrage opportunity for a gold trader to: buy low at A’s relatively low offer price for gold sell high as B’s relatively high bid price for gold This example illustrates arbitrage with transactions costs based on a one million ounce initial transaction. Buy 1m ounces of gold at Dealer A’s sell price of ￡250.25/oz. This costs 1m oz ￡250.25/oz -￡250.25m Sell 1m ounces of gold