北大金融学课件(英文版)第3章(4课时).ppt

3-* Changes in Exchange Rates Appreciation vs. depreciation under floating exchange rate regime Revaluation vs. devaluation under fixed exchange rate regime. Case 2 In April 21, 2008, Rmb/Dollar=7.00 In April 22, 2008, Rmb/Dollar=6.89 Case 1 In 1994, Rmb/Dollar=5.70 went to: Rmb/Dollar=8.30 √ 3-* Can these happen? $1.7/￡ in New York while $1.6/￡ in London $1.7/￡, SFr3/Pound $0.50/SFr exist at a point in time? √ 3-* Arbitrage in the spot market Arbitrage is a process of buying and selling to make a (nearly) riskless pure profit, which ensures the rates in different locations essentially the same. London $1.70/Pound $1.60/Pound New York √ 3-* Arbitrage in the Spot Market Citibank HSBC Bid Price for HK$ $0.1288 $0.1298 Ask Price for HK$ $0.1293 $0.1303 √ If you have HKD10,000 in hand and would exchange them for USD, which bank would you go to? If you are an arbitrager, can you make a deal with the bank? 3-* Arbitrage in the spot market Triangular arbitrage is a process of buying and selling, ensures that the rates and cross-rates are related and consistent among themselves. $1.70/Pound $0.50/SFr SFr3/Pound $150 ￡100 $170 √ 3-* A Suggested Answer Firstly, purchase Swiss Francs with my 150 dollars at $0.5/SFr: $150=SFr300 Secondly, purchase Pounds in exchange for Swiss Francs at SFr3/￡: SFr300=￡100 Thirdly, receive dollars in exchange for Pounds at $1.7/￡: ￡100=$170 The total profit is $20. √ 3-* Arbitrage Game You start with $100 and want to end up with dollars. How would you make profit from the three rates? $0.20/krone $0.01/yen 25yen/krone √ 2008 All copy rights reserved. CHAPTER 3 THE FOREIGN EXCHANGE MARKET 3-* Foreign Exchange Foreign exchange is the act of trading different nations’ moneys. Demand deposits in banks Paper moneys Coins Foreign exchange rate is