Chapter04PPT.pptVIP

Chapter 04 International Parity Conditions 1 International Parity Conditions Foreign exchange rate quotations Measuring a change in spot rates Prices and exchange rates Law of one price Absolute Purchasing Power Parity (PPP) Relative Purchasing Power Parity Interest rates and exchange rates The Fisher effect International Fisher effect Forward rate Interest Rate Parity (IRP) Covered/Uncovered Interest Arbitrage Forward rates as an unbiased predictor of future spot rates 2 Foreign Exchange Rates Quotations Direct and Indirect Quotes A direct quote is a home currency price of a unit of a forei