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l2 14 currency exchange rates: determination and forecasting

This class was created by Brainscape user Steven Popovic. Visit their profile to learn more about the creator.

By: Steven Popovic
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Decks in this class (16)

A calculate and interpret the bid–ask spread on a spot or forward foreign currency quotation and describe the factors that affect the bid–offer spread;
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b identify a triangular arbitrage opportunity, and calculate its profit, given the bid–offer quotations for three currencies;
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c distinguish between spot and forward rates and calculate the forward premium/ discount for a given currency;
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d calculate the mark-to- market value of a forward contract;
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e explain international parity relations (covered and uncovered interest rate parity, purchasing power parity, and the international Fisher effect);
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f describe relations among the international parity conditions;
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g evaluate the use of the current spot rate, the forward rate, purchasing power parity, and uncovered interest parity to forecast future spot exchange rates;
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h explain approaches to assessing the long-run fair value of an exchange rate;
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i describe the carry trade and its relation to uncovered interest rate parity and calculate the profit from a carry trade;
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j explain how flows in the balance of payment accounts affect currency exchange rates;
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k describe the Mundell–Fleming model, the monetary approach, and the asset market (portfolio balance) approach to exchange rate determination;
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l forecast the direction of the expected change in an exchange rate based on balance of payment, Mundell–Fleming, monetary, and asset market approaches to exchange rate determination;
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m explain the potential effects of monetary and fiscal policy on exchange rates;
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n describe objectives of central bank intervention and capital controls and describe the effectiveness of intervention and capital controls;
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o describe warning signs of a currency crisis;
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p describe uses of technical analysis in forecasting exchange rates.
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l2 14 currency exchange rates: determination and forecasting

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