国际金融(英文版).ppt

InternationalFinance HuangChunyang D Sc Email huangchunyang1 InternationalBusinessSchool SYSUFall 2010Donotquotewithoutpermission 1 Prerequisites Economics macro andmicro 2 Textbooks ThomasA Pugel InternationalFinance 14thedition McGraw Hill 2009 ISBN 978 7 300 10658 8Otherreadingmaterials 2 BrunoSolnikandDennisMcleavey 国际投资 InternationalInvestment 双语版 第五版 中国人民大学出版社 ISBN 978 7 300 08020 8 F 27483 国际经济学 国际金融分册 原书第六版 作者 美 阿普尔亚德等 机械工业出版社 ISBN 9787111295587 3 Presentationassignments StudentsareexpectedtopresenttheirpapersintheclassesTopics anytopicsininternationalfinanceandinternationalinvestment 4 Classparticipation Activeparticipationduringclassesfacilitateslearningandwillberewardedwithextrapointsinfinalgrading 5 Grading Presentationandclassparticipation40 Finalexam60 Totals100 6 Purposesofthecourse TounderstandtheoperationofinternationalfinancialmarketsandthefactorsdeterminingexchangeratesTointerprettheimpactofvariousmacropoliciesforopeneconomiesonanation sinternalandexternalbalances 7 Moreonthecourse Traditionally itisatheoreticalcourseAddpracticalcontentsinthefactsofrisingmultinationalfirmsandincreasingforextradingvolumes etc Richapplications 8 Ajourneytothecourse BalanceofpaymentandtheforeignexchangemarketBalanceofpayment chapter2inPu Theforeignexchangemarket chapter3inPu andlecturenotes Foreignexchangeparityrelations chapter4inPu Andlecturenotes Factorsdeterminingexchangerate chapter5inPu andlecturenotes 9 Governmentpoliciestowardtheforeignexchangemarket chapter6inPu Internationallendingandfinancialcrisis chapter7inPu MacropoliciesforopeneconomiesOpenmacro economysystem chapter8inPu Internalandexternalbalancewithfixedexchangerates Chapter9inPu 10 Floatingexchangeratesandinternalbalance Chapter10inPu Theexchangeratesystemsintheworld chapter11inPu 11 Lecture1 Balanceofpayment Whatisacountry sbalanceofpayment AsystematicaccountofalltheexchangesofvaluebetweenresidentsofthatcountryandtherestoftheworldduringagiventimeperiodTowflowsinanytransaction double entrybookkeepingAcredit isaflowforwhichthecountryispaidAdebit isaflowforwhichthecountrymustpay 12 SixcategoriesofflowsMerchandisetradeflowsServiceflowsIncomeflowsUnilateraltransfersPrivatecapitalflowsOfficialinternationalreserveflows 13 Someexamples ExportsandimportsofgoodsExpendituresofforeignvisitorsStudyabroadinterestsanddividendreceivedInternationalmigrants remittancesLendingto borrowingsfrom foreignerDirectinvestmentsandinternationalportfolioinvestment 14 ConcreteexamplesofBOPbook keeping Disfordomestic Fisforforeign ADcompanyexportgoodsvaluedat 6 000toaFcompany TheFcompanytransferstheamountfromits accountinaFbanktotheDcompany s inthesamebank ADconsumerpurchasegoodsvaluedat 12 000fromaFcompany Theamountistransferredfromtheconsumer s accounttotheFcompany s accountinaDbank 15 3 ADresidentunilaterallytransfergoodsvaluedat 1 000toaFresident ADcompanyprovidestransportationservicevaluedat 2 000toaFcompany TheFcompanypaidbytransferringtheamountfromits accountinaDbanktotheDcompany s accountintheanotherDbank AFcompanypaysadividendof 2 500tooneofitsshareholderinDcountry TheamountispaidfromFcompany s accountinaDbank 16 6 ADresidentbuy 5 000bondissuedbyaFcompany TheamountistransferredfromDresident s accountinaDbanktotheFcompany s accountinthesameDbank 7 AFcommercialbanksell 800totheFcentralbankforFcurrency Bothpartieshave accountinaDbank 17 Debit Credit 1 IncreaseinDholdingExportofgoodsofFfinancialassets2 ImportofgoodsIncreaseinFholdingofDfinancialassets3 UnilateraltransferExportofgoods4 DecreaseinFholdingServiceexportofDfinancialassets5 DecreaseinFholdingIncomeofDfinancialassets6 IncreaseinDholdingDecreaseinDholdingofFfinancialassetsofFassetsDecreaseinFholdingIncreaseinFholdingofDfinancialassetsofDfinancialasset 18 SixbalancesMerchandise goods tradebalanceGoodsandservicebalance tradebalance Goods service andincomebalanceCurrentbalance netforeigninvestment FinancialaccountbalanceOverallbalance officialsettlementbalance 19 ThestatisticdiscrepancyitemSomethingwasunder measuredAnetresultsoferrorsandomissions 20 ThemacromeaningofcurrentaccountbalanceFinancingandinternationalfinancialflows Netforeigninvestment If CA IfNationalsaving S versusdomesticinvestment Id S Id If sothatCA S IdDomesticproduction Y versusnationalexpenditure E Y C Id G X M E C Id G andCA X M approximately sothatCA Y E 21 ThemacromeaningoftheoverallbalanceTheofficialsettlementbalance B CA FAB OR 0TheinternationalinvestmentpositionAstatementofthestocksofanation sinternationalassetsandforeignliabilitiesatapointintimeFlowvs stock lenderorborrowervs creditorordebtor 22 Homework PrepareChina sBOPaccordingtotheformatinfigure2 1inPugel page15 for1999 2009 andanalyzethetrends goodsandservicebalances currentaccountbalances officialsettlementbalances etc 23 Lecture2 Theforeignexchangemarket Whatisforeignexchange DynamicconceptStaticconceptDemandandsupplyforforeignexchangeCurrentaccount e g payforimportofgoodsFinancialaccount e g investabroad 24 FloatingexchangeratesDownward slopingdemandcurveEquilibriumexchangerateShiftindemandandsupplycurvesFixedexchangeratesParvalueandthenarrowbandSupplyanddemandgapGovernmentintervention 25 ForeignexchangequotationDirectquotation theamountofDCrequiredtopurchaseoneunitofFCIndirectquotation theamountofFCrequiredtopurchaseoneunitofDCBidprice theexchangerateatwhichthedealeriswillingtobuyacurrencyAsk offer price theexchangerateatwhichthedealeriswillingtosellacurrency 26 Thedealerneedtoearnaprofit soshealways buylowandsellhigh Bid askspread thedifferencebetweenthebidpriceandtheaskprice canbeinpercentage Factorsaffectingthebid askspreadsMarketconditionDealerpositionLiquiditymidpointprice theaverageofthebidpriceandtheaskpricebasicpoint usually0 0001 0 01forJPY or0 01 27 Someexamples 1 6543 1 6547 directquoteinUS 0 6043 0 6045 indirectquoteintheUS NotethattheDC FCdirectbid ask exchangerateisthereciprocaloftheindirectask bid exchangerateThebid askspreadis0 0004 3bp direct or0 0002 2bp indirect Thepercentagebid askspreadis0 0004 1 6547 0 0242 2 42bp direct or0 0002 0 6045 0 0331 3 31bp indirect Themidpointexchangerateis1 6545 direct or0 6044 indirect 28 Questions 1 SupposeyouwanttoconvertUSdollarintopound andgetthreedifferentquotes A 1 6432 38B 1 6433 36C 1 6434 37 fromwhichdealerwouldyoubuypound 2 TheinterbankquotesforUSdollarandpoundare 1 6433 36 IfbankAwanttoearn2bpprofit whatquotesshoulditgivetoitsretailcustomers 29 Cross ratecalculationswithbid askspreadsExample2 1 considerthefollowingquotesinvolvingthedollar pound andtheeuro 0 9836 39 1 5473 1 5480Computetheeffective bidandaskcross rates aswellasthe bidandaskcross rates 30 Solution1 bid bid bid 0 9836 1 5473 1 5219dollarperpoundbidrate ask ask ask 0 9839 1 5480 1 5231dollarperpoundaskrate bid bid bid 1 ask 1 ask 1 1 5480 1 0 9839 0 6566poundperdollarbidrate ask ask ask 1 bid 1 bid 1 1 5473 1 0 9836 0 6571poundperdollaraskrateSo theeffective bidandaskcross ratesis 1 5219 31 andtheeffective bidandaskcross ratesis 0 6566 71 31 Solution2 Imagingyouwanttoconvertdollarintopound usingdollartobuyeurofirst 1 1 0 9839 andthenusingtheeurotobuypound 1 1 1 5480 Theresultingcross rateis1 0 6566 or1 1 5231 Ifyouwanttoconvertpoundintodollar usingpoundtobuyeurofirst 1 1 5473 andthenusingtheeurotobuydollar 1 0 9836 Theresultingcross rateis1 1 5219 or1 0 6571 So theeffective bidandaskcross ratesis 1 5219 31 andtheeffective bidandaskcross ratesis 0 6566 71 32 Arbitrage Paynothingforsomething or getsomethingfornoting thereisnotsuchthingasafreelunch Anydeviationfrom thelawofoneprice willpresentanarbitragingopportunity Basicstrategy buylow sellhigh Anarbitragingstrategyisrisk free Incontrast aspeculativestrategyisalwaysassociatedwithsomedegreeofrisk 33 Bilateralarbitragewithbid askspreadsNo arbitragecondition FC DC bid DC FC bid 1 or FC DC ask DC FC ask 1 Example2 2 DC FC 0 80025 0 80041 FC DC 1 2498 1 2503 Isthereanarbitrageopportunity Ifso whatisthearbitragingstrategy WhataboutDC FC 0 8003 0 8005 andFC DC 1 2484 1 2490 Notethatwhentheratesaremisquoted thedirectbid ask ofonecurrencyisnotthereciprocalofitsindirectask bid 34 Triangulararbitragewithbid askspreadsNo arbitragecondition theimpliedcross rateisconsistentwiththeactualcross rateExample2 3 FC1 DC 0 9836 39 FC1 FC2 1 5373 80 DC FC2 1 5219 31 Isthereanarbitrageopportunity Ifso whatisthearbitragingstrategy 35 ForwardforeignexchangerateAforwardforexcontractisanagreementtoexchangeonecurrencyforanotheronaspecifieddateinthefutureataratesetnow theforwardexchangerate AspotrateistheprevailingrateinthemarketTheforwardrateisnotthesameasthefuturespotrate 36 TradinginvolvingforwardexchangerateOpenpositionLongpositionShortpositionHedging offsettingalong short positioninaforeigncurrency orcoveringtheopenpositionSpeculating deliberatelyestablishinganetposition longorshort inaforeigncurrencyHedgingeliminatesriskexposure whereasspeculationincreasesriskexposure 37 Forwardpremium discount theproportionatedifferencebetweenthecurrentforwardexchangerateandcurrentspotexchangeratef forwardrate spotrate spotrate underindirectquotation Note thequotationconvention directorindirect affectsthesignofforwardpremium Onealternativeistoconvertthedirectquoteintoindirectquote andthencalculatethepremiumAnnualizedforwardpremium 38 Someexamples AUSexportersignsacontractwithaFrenchimporterfor1millioneuroofgoods tobedeliveredinthreemonths Thecurrentspotrateis 0 7125 andthe3 monthsforwardrateis 0 7225TheUSexporterhasanopen long positionof1millioneuroIftheUSexporteralsosignsaforwardcontracttosell1millioneurointhreemonths sheeliminatesherexposuretoexchangeraterisk hedging If instead theUSexporterexpectstheeurowillappreciateagainstthedollar shesignsaforwardcontracttobuy1millioneuroin3months Sheincreasesherexposuretoexchangeraterisk speculation 39 DepreciationandappreciationSupposethatinthebaseyear 1 0 6 and1 120JPY Afewyearslater 1 0 75 and1 90JPY Isthedollardepreciatedorappreciated Thenominaleffectiveexchangerate NEER isthetrading volume weightedcurrencyindexAssumethatTheUSonlytradeswiththeUKandJapan andthetrading volume weightedare40 and60 respectively ThedollarNEERis 0 75 0 6 40 90 120 60 0 95 40 Anothermeasureofacountry sinternationalcompetivenessisrealexchangerate RER whichincludesonlytheeffectofnominalexchangerate butalsopricelevels AssumethatJPY 94 06in1995 andJPY 110 22in2005 Basedonthepricelevelsin1995 TheUSpricelevelin2005is128 14 andtheJapanesepricelevelis98 17 Therealexchangeratein2005is 110 22 128 14 98 17 143 87 Inotherword therealappreciationof againstJPYfrom1995to2005isabout53 143 87 94 06 94 06 41 Ifwereplacerealexchangerate RER withnominalexchangerateinthecalculationofnominaleffectiveexchangerate NEER wehaveourthirdmeasureofchangeinexchangerate namelyrealeffectiveexchangerate REER OthermeasuresofexchangerateincludesPPPindex BigMaxindex etc 42 Lecture3 InternationalParities SomesymbolsCurrentspotratebetweendomesticcurrencyandforeigncurrencyisFC DC S One yearforwardexchangerateisFC DC F One yeardomesticinterestrateisrD One yearforeigninterestrateisrF One yeardomesticinflationrateisID One yearforeigninflationrateisIF One yearforwardpremiumisf F S S DomesticpricelevelPD foreignpricelevelPF 43 Interestrateparity coveredinterestparity with1unitofdomesticcurrency youcaninvesteitherinthedomesticmarketorintheforeignmarket Ifyouinvestinthedomesticmarket youwillget 1 rD unitofdomesticcurrencyinoneyear Ifyouinvestintheforeignmarket youwillgetS 1 rF Funitofdomesticcurrencyinoneyear No arbitrageconditionimpliesthat 1 rD S 1 rF F orF S 1 rF 1 rD or F S S rF rD 1 rD Thelinearapproximationis f rF rD whichstatesthattheforwardpremium inpercentage isapproximatelytheinterestratedifferential 44 Thisparityrelationseemstobecounterintuitive Afterall ifinterestrateincreaseinforeignmarket capitalwillflowoutofthedomesticmarket whichshouldleadtothedepreciationofdomesticcurrency Thekeytounderstandtheinterestrateparityistheexpectedfutureexchangerate Specifically higherforeigninterestrateshouldindeedleadtotheoutflowofdomesticcurrencyinthespotmarket Consequently ontheonehand thedecreasingmoneysupplyindomesticmarket duetomoneyoutflow shouldleadtohigherdomesticinterestrate whichincreasestherateofreturnindomesticmarket Atthemeantime therateofreturninforeignmarketshoulddecreasesduetomoneyinflow Ontheotherhand theneedforhedgingshouldincreasethedemandfordomesticcurrencyinthefuture Botheffectsleadtotheexpectationthatdomesticcurrencywillappreciateinthefuture higherexpectedfuturespotratefordomesticcurrency Sinceforwardexchangerateistheunbiasedpredictoroffuturespotexchangerate forwardexchangerateshouldbeatpremium 45 UncoveredinterestrateparityTheexpectedone yearspotrateisE S1 Usingthesamestrategyasincoveredinterestrateparity exceptthatyoudecidenottocoveryourpositionusingforwardcontractInequilibrium wehave 1 rD S0 1 rF E S1 orE S1 S0 1 rF 1 rD orapproximately E s rF rD whichstatesthattheexpectedexchangerateappreciationshouldbeapproximatelytheinterestratedifferential 46 Absolutepurchasingpowerparity PPP Withoneunitofdomesticcurrency youcanbuy1 PDunitofgoodsindomesticmarketYoucanalsobuyS PFunitofthesamegoodsinforeignmarketThelawofonepriceimpliesthat PD PF S orS PF PD 47 RelativePPP ExpectedfuturePPP Bythesamereasoning attheendoftheperiod 1 PD 1 E ID E S1 PF 1 E IF PD 1 E ID PF 1 E IF E S1 orE S1 S0 1 E IF 1 E ID Thelinearapproximation s E S1 S0 1 E IF E ID whichstatesthattheexchangeratevariationisapproximatelytheinflationratedifferential 48 CombiningrelativePPP coveredinterestrateparity anduncoveredinterestrateparity wehave E S1 S0 F S 1 rF 1 rD 1 E IF 1 E ID orapproximately ExpectedappreciationofDC premiumonforwardDC differencebetweenforeignanddomesticinterestrates expecteddifferencebetweenforeignanddomesticinflationrates 49 RealinterestrateequilibriumFrom 1 rF 1 rD 1 E IF 1 E ID wehave 1 rF 1 E IF 1 rD 1 E ID orapproximately rF E IF rD E ID whichstatesthattherealinterestrateshouldbeapproximatelyequalinternationally 50 InternationalFisherrelationDomesticFisherrelation 1 r 1 p 1 E I orapproximatelyr p E I Assumingthattherealinterestratepisconstantovertime thefluctuationinnominalinterestratesarecausedbyrevisionininflationaryexpectation Applyingtotheinternationalsetting andassumingthattherealinterestratesareequalglobally wehave 1 rF 1 rD 1 E IF 1 E ID orapproximately rFC rDC E IF E ID whichstatesthatthenominalinterestratedifferentialisapproximatelytheinflationaryexpectationdifferential 51 ForeignexchangeexpectationrelationF E S1 Or F S0 S0 E S1 S0 S0Whichstatesthattheforwardpremium discount isequaltotheexpectedexchangeratemovement 52 EmpiricalevidenceoninternationalparitiesKeepinmindthatthevariousinternationalparityrelationsholdundersomestrictassumptions suchas Nottransactionand ortransportationcostsNotcapitalcontrolFloatingexchangeregimesNotimporttaxandrestriction notexportsubsidiesInvestorsarerisk natural 53 Interestrateparityholdsverywellbothintheshortrunandlongrun exceptforsomedevelopingcountrieswithcapitalcontrolandtaxesUncoveredinterestrateparitydoesnotholdwellinrealworld particularlyintheshortrun Possibleexplanationsinclude 1 measuringerrorinexpectedfuturespotrate 2 riskpremiumPPPperformspoorlyintheshortrun butissupportedinthelongrun Possibleexplanationsinclude 1 measuringerrorininflationrate 2 barriersoninternationaltrade 3 factorsotherthaninflationratemayinfluenceexchangerates 54 AtestofinternationalFisherrelationisactuallyatestofwhethertherealinterestratesareconstantinternationally Theevidenceisunsupportedintheshortrun butissupportedinthelongrun Possibleexplanations 1 unsynchronizedbusinesscycleintheshortrun 2 economicintegrationinthelongrunEmpiricalevidenceonforeignexchangeexpectationrelationshowsthat intheshortrun theexchangerateistoovolatiletobeexplainedbytheinterestratedifferential however overthelongrun thereseemstobeariskpremiuminthefuturespotexchangerate 55 Lecture4Whatdeterminesexchangerates AhistoryofexchangeratessincethestartoffloatingexchangerateregimeThelong termtrendsThemedium termtrendsTheshort termvariabilityAnanalyticalframeworkAssetmarketapproachtoexchangeratesintheshortrun portfoliorepositioning Monetaryapproachtoexchangeratesinthelongrun economicfundamental 56 ExchangeratesintheshortrunTheuncoveredinterestrateparitystatesthat E s rF rDTherefore changeinanyoftheotherthreefactorsshouldleadtochangeinspotexchangerateExample1 domesticinterestrateincrease infavorofbonddenominatedinDC increasingdemandforDC DCappreciateinspotmarket FCisexpectedtoappreciateinthefuture 57 Example2 expectedfuturespotrateofFCappreciate infavorofbonddenominatedinFC increasingdemandforFC DCdepreciateinspotmarket FCisexpectedtoappreciateinthefutureSelf fulfillingexpectation actonexpectationSelf fulfillingexpectationcanhaveeitherstabilizingeffectordestabilizingeffectonexchangerates dependingonwhethertheexpectationisconsistentwitheconomicfundamental 58 ExchangeratesinthelongrunPPPimpliesthatexchangeratesarecloselyrelatedtothelevelsofpricesforproductsindifferentcountries atleastinthelongrunThepricelevelsindifferentcountriesisaffectedbythemoneysuppliesinthesecountriesThus inthelongrun exchangeratesarelinkstorelativemoneysuppliesindifferentcountries 59 PPP S PF PDThequantitytheoryofmoneysupplyanddemand Thus wehave AssumingthattheKsareconstant theequationstatesthatDCwillappreciateif 1 thegrowthofdomesticmoneysupplyisrelativelyslower 2 thegrowthofdomesticrealoutputisrelativelyfaster 60 Example1 Moneysuppliesandexchangeratecutindomesticmoneysupply credittighteningbydomesticbanks decreasingdomesticaggregatedemand output job andproductprices thepurchasingpowerofDCshouldrise DCappreciateExample2 Realincomesandexchangeraterealdomesticincomeincreaseduetosupply sidereasons moredemandformoney transactiondemand ifthemoneysupplyisunchanged thepurchasingpowerofDCshouldrise DCappreciate 61 ExchangerateovershootingIntheshortrun theactualexchangerateovershootitslong runvalueandthenrevertbacktowarditDomesticmoneysupplyunexpectedlyjumps theforeigncurrencyisexpectedtoappreciate becauseproductpricesaresticky domesticinterestrateisdrivendown leadingtotheappreciationofforeigncurrencyThecombinationofthetwoeffectswilldriveuptheexchangerateofforeignc