第10讲Covred and Uncovered Interest Rate Parity(国际金融(香港大学,WONG Ka Fu).pptVIP

Covered and Uncovered Interest Rate Parity WONG Ka Fu 26th January 2000 Comparing Local and Foreign Prices Prices within a country Prices across countries P (in home currency) P* (in foreign currency) 1 HD = x FD = 1/e FD, i.e., e HD = 1 FD P vs. eP* Return on a home asset Pt+1 - Pt dividends or any interest payments to the asset holder ? Dt+1 Pt+1 - Pt + Dt+1 Rate of Return on a home asset Return / cost of asset at time of purchase / year Home asset in home currency ( Pt+1 + Dt+1 - Pt )/ Pt = [ ( Pt+1 + Dt+1 ) / Pt ] - 1 Return on a foreign asset A foreign investor invests in a fore