LectureLecture：FOREIGNEXCHANGEMARKET(国际金融-南开,胡春田).docVIP

PAGE  PAGE 14 Lecture 1：FOREIGN EXCHANGE MARKET Definition: F.E: ①bank deposit in terms of foreign currency ②foreign currency: bill, coin ③short terms claims on foreign assets: treasury bill, stock, foreign bond F.E.MARKT：place which serves as intermediary of selling and buying F.E. No single place PARTICIPANTS：①retail customer ②commercial banks ③F.E. brokers ④central banks EXCHANGE RATE : Bilateral vs weighted average (effective exchange rate) Nominal vs. real Buying vs selling rate (bid) (offer)(ask) spread bidoffer no transaction cost ? RMB/￡==1/（￡/RMB） if transaction cost exist ? (RMB/＄)bid==1/ (＄/RMB)offer (RMB/＄)offer==1/ (＄/RMB)bid Determination of ER regime flexible or clean floating (pure) fixed (vs pegged) managed floating (dirty) crawling peg target zone How to maintain fixed ER system: legal restriction on dealing transaction of FE via the central bank private hedge of FE be banned preserving fined system and convertibility ?intervention Fixed sustainable? Black market BOP crisis, speculative attacks Spot vs forward mkts ↓ ↓ immediate delivery future delivery but price is determined today Why using forward：hedging (avoid risk) Coexistence of forward mkt spot mkt ?arbitraging(if no capital control) Arbitrage： 1+i ＜ (1+i*)F ? capital outflow 1+ i* ＜ (1+i)S ? capital inflow ? 1+i = (1+i*)F ? ? ? covered interest parity（CIP） is called forward premium（discount） if greater（smaller） than zero。 test ① (F-S)/S (F-S)/S covered interest parity neutral band i-i* ②econometrics testing： specification: (F-S)/S = α+β(i-i*) ; or i =α+β[i*+(F-S)/S]; or i-i* =α+β(F-S)/S Null hypothesis: α=0, β=1 FRENKEL/LEVICH MODEL （test 1） Types of transaction co