【正文】 ing Power Parity (PPP) ? There are two versions of PPP: absolute PPP and relative PPP ? Absolute PPP states that the exchange rateadjusted price for any good (or a basket of goods) is the same everywhere. P* and P are the foreign price and domestic price of the good, eP*= P II. Relative PPP suggests that the change in the exchange rate over time between two countries will reflect relative changes in the price levels (or the difference in the inflation rates) of the two countries. or SR1 and SR0 are the exchange rates at time 1 and 0 respectively. Further, SR1 is the expected rate one period from today (date=0). INF and INF* are the expected domestic and foreign inflation rates. e1/e0 = (1 + INF)/(1 + INF*) (SR1 SR0 )/SR0= ( INF INF*)/(1 + INF*) III. Open Fisher Parity ? Open Fisher parity assumes constant, real interest rates (or the difference in real interest rates in countries are constant) as: or ? ex ante relationship. ? It implies that there is no unique risk premium in the forward rates quoted in foreign exchange markets. SR1/SR0 = (1 + r)/(1 + r*) (SR1SR0)/SR0 = ( r r*) /(1+ r*) III. Open Fisher Parity . nominal interest rate is 8% while Japan is 12%. Given the current exchange rate, SR0, of US$165。 ? The Japanese nominal interest rate is higher than the ., its currency is expected to depreciate. Why? IV. Unbiased Forward Market Hypothesis ? Equating the two equations (1) and (4) because their right sides are identical, we obtain: ? The forward price is an unbiased predictor for the future spot price. This is the unbiased forward market hypothesis, or speculative efficient market (SEM) hypothesis. FR = SR1 (5) Motivations of Participants in FX Market ? Foreign exchange market has three types of activities: arbitrage, hedging and speculation. ? Hedging allows of importers, exporters and multinational corporations to avoid currency exposure, ., volatility in profits due to FX volatility. ? 1. Hedging Risk: Diversifiable or Systematic? ?Diversifiable risk for both the Customer and the Bank ?Systematic for the customer but diversifiable for the bank ?Systematic for both the customer and the bank ? 2. Hedge Ratio Motivations of Participants in FX Market Example Given the following: ? Spot rate: € $ or US$€ ? Forward Rate: € $ or US$€ ? German interest rate: 12% per annum ? . interest Rate: 10% per annum A payment of € 10 million is required in three months. Which market (forward or Money Market) should be used for hedging? Motivations of Participants in FX Market Example ? Cost in forward market in three months US$ € x € 10 million = US$ million ? Cost in Money Market ? Find the present value of the foreign currency at the foreign market rate. We invest in the German money market that will yield €100 in three months, the amount of German marks required today is the present value of €100 at 12%, ., €10 million/ (1 + 12%/4) = € million Motivations of Participants in FX Market ? Convert this amount to US$ at the prevailing spot rate to determine the borrowing amount in the US$. € million x US$€ = US$ million ? Find the future payment in US$ to pay off the loan in the money market at 10%. That is, US$ million x ( 1 + 10%/4) = US$ million ? The outflow in the money market (US$ million) is higher than the outflow in the forward market (US$ million). The forward market is preferred. Motivations of Participants in FX Market ? We can reach the same conclusion by puting FRc: FRc = SR0 (1+)/(1+) =US$ / € ? Because the actual forward € is undervalued (US$ US$, actual), obtaining the foreign currency through the forward market is desirable. 41 （二）外匯期貨交易 （ Future Transaction） ? 外匯期貨交易是指在有組織的交易市場以公開競價的方式，買賣在未來某一標(biāo)準(zhǔn)交割日期，根據(jù)合約價格交割標(biāo)準(zhǔn)數(shù)量外匯合約的交易。 ? 1982年成立了倫敦國際金融期貨交易所（ London International Financial Future ExchangeLIFFE），還有新加坡商品期貨交易所等。 ? Futures contracts have standardized contract terms while forward contracts are tailormade to the customers。 ? Futures contract is markedtomarket。 s C a s h F l ow___ ___ ____ ___ ___ ___ ____ ___ ___ ___ ____ ___ ___ ___ ____ ___ ___ ___ ____ ___ ___M on da y M or n i n g I n ve s t or bu y s on e C H F f u t ur e s ( a ) $ 1,755 ( i ni t i a l m a r gi n )c on t r a c t m a t u r i ng i n t h r e ed a y s . P r i c e i s $ M on da y C l os e F u t ur e s pr i c e dr ops t o ( b ) I n v e s t or pa y s :$ . P os i t i on i s m a r ke d 1 25,0 00 x ( 0 .649)t o m a r ke t . = $12 5.( c ) M a r gi n a / c b a l a n c e$ 1,75 5 $12 5 =$ 1,63 0T u e s da y C l os e F u t ur e s pr i c e dr ops t o ( a ) I n ve s t or pa y s :$ ,0 00 x ( 9 5)m a r ke d t o m a r k e t . = $50 0( b ) M a r gi n a / c b a l a n c e$ 1,63 0 $50 0= $ 1,13 0 ( b e l ow m ai n t e n an c e m ar gi n o f $1,3 00 ).( c ) I n ve s t or s u ppl i e sv ar i at i on m ar gi n of $ 62 5 t o m a k e u p $1 ,755 .W e d C l os e F u t ur e s pr i c e r i s e s t o ( a ) I n ve s t or r e c e i ve s $ ,0 00 x ( $ 46 $0 .645)t a ke s pl a c e . = $12 5( b ) M a r gi n a