国际金融3选读.ppt

* D. International investment with cover (2).A currency is at a forward premium(discount) by as much as its interest rate is lower(higher) than the interest rate in the other country. * D International investment with cover (3) approximately: The forward premium on the foreign currency equals the difference between the domestic interest rate and the foreign interest rate. * D. International investment with cover Covered interest parity links four current market rates together—the forward exchange rate, the spot exchange rate, and the interest rates in the two countries. * E. International investment with cover Uncovered international investment ??? The unhedged investment has a speculative element to it,and it is called an uncovered international investment. * E. International investment without cover Uncovered international financial investment involves investing in a financial asset denominated in a foreign currency without hedging or covering the future proceeds of the investment back into one’s own currency. * E. International investment without cover EUD: the expected uncovered interest differential . EUD = (1 + iu k) eex/e - (1 + ius) EUD=Expected appreciation+( (iuk-ius ) = (eex-e)/ e +( (iuk-ius ) A useful approximation is that EUD equals the expected rate of appreciation (depreciation if negative) of the foreign currency plus the interest differential (if - i). * E. International investment without cover If an uncovered foreign financial investment is exposed to exchange rate risk,why would anyone want to invest uncovered? component: 1.return---EUD is positive 2.risk-benefit of diversification of investment or risk neutral * E. International investment without cover uncovered interest parity: a currency is expected to appreciate(depreciate) by as much as its interest rate is lower(higher) than the interest rate in the other country . * E. International investment without cover That is, approximately: The