国际金融英文版(托马斯.A.普格尔 著)---Chapter 3.pptVIP

THE BASICS OF CURRENCY TRADING Summery : The Meaning of “Foreign Exchange” - It refers to assets denominated in the currency of another nation or group of nations. - It can be cash, funds available on credit cards and debit cards, traveller’s checks, bank deposits etc. -The exchange rate is a price – the number of units of one nation’s currency that must be surrendered in order to acquire one unit of another nation’s currency. Floating exchange rate D ￡ (billions) Exchange rate $ per ￡ S E 1.98 1.60 270 320 300 B A D Floating exchange rate ￡ (billions) Exchange rate $per ￡ S E1 1.98 1.60 270 320 300 E2 D1 D2 Fixed exchange rates What is a fixed exchange rate system? A fixed exchange rate system is a system under which the monetary officials buy and sell a currency so as to keep its exchange rate within an officially stipulated band. Fixed exchange rates The determination of exchange rates under a fixed exchange rate regime Fixed exchange rates Exchange rate $ per SFr QSFr DSFr SSFr 0.50 0.60 E A B 475 500 575 B. The Market for Swiss Francs (SFr) Question: How did Swiss Government intervene the market to maintain its official rate of 0.50$/SFr? Fixed exchange rates ￡ (billions) Exchange rate $per ￡ S E 1.98 1.60 270 320 300 B A D Current Arrangement Textbook p39 Arbitrage within the spot exchange market What is an arbitrage? An arbitrage is the process of buying and selling to make a riskless pure profit. The function of arbitrages Arbitrages can ensure the rates in different locations are essentially the same and the rates and cross rates are related and consistent among themselves. The result of arbitrages are there will not be any arbitrage opportunities in the market. Arbitrage within the spot exchange market Arbitrage is the practice of taking advantage of a price differential between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference betw