ch04PARITY CONDITIONS AND CURRENCY FORECASTING(跨国公司财务管理Joseph F. Greco)概要1.pptVIP

Multinational Financial Management Alan Shapiro7th Edition J.Wiley Sons Power Points by Joseph F. Greco, Ph.D. California State University, Fullerton CHAPTER 4 PARITY CONDITIONS AND CURRENCY FORECASTING CHAPTER OVERVIEW I. ARBITRAGE AND THE LAW OF ONE PRICE II. PURCHASING POWER PARITY III. THE FISHER EFFECT IV. THE INTERNATIONAL FISHER EFFECT V. INTEREST RATE PARITY THEORY VI. THE RELATIONSHIP BETWEEN THE FORWARD AND FUTURE SPOT RATE VII. CURRENCY FORECASTING PART I. ARBITRAGE AND THE LAW OF ONE PRICE I. THE LAW OF ONE PRICE A. Law states: Identical goods sell for the same price worldwide. ARBITRAGE AND THE LAW OF ONE PRICE B. Theoretical basis: If the price after exchange-rate adjustment were not equal, arbitrage in the goods worldwide ensures eventually it will. ARBITRAGE AND THE LAW OF ONE PRICE C. Five Parity Conditions Result From These Arbitrage Activities 1. Purchasing Power Parity (PPP) 2. The Fisher Effect (FE) 3. The International Fisher Effect (IFE) 4. Interest Rate Parity (IRP) 5. Unbiased Forward Rate (UFR) ARBITRAGE AND THE LAW OF ONE PRICE D. Five Parity Conditions Linked by 1. The adjustment of various rates and prices to inflation. ARBITRAGE AND THE LAW OF ONE PRICE 2. The notion that money should have no effect on real variables (since they have been adjusted for price changes). ARBITRAGE AND THE LAW OF ONE PRICE E. Inflation and home currency depreciation: 1. jointly determined by the growth of domestic money supply; 2. Relative to the growth of domestic money demand. ARBITRAGE AND THE LAW OF ONE PRICE F. THE LAW OF ONE PRICE - enforced by international arbitrage. PART II. PURCHASING POWER PARITY I. THE THEORY OF PURCHASING POWER PARITY: states that spot exchange rates between currencies will change to the differential in inflation rates between countries. PURCHASING POWER PARITY II. ABSOLUTE PURCHASING POWER PARITY A. Price levels adju