ch14(part3)国经济学多米尼克

1、Interest Arbitrage 套利套利Interest arbitrage is the transfer of short-term liquid funds abroad to earn a higher rate of return.套利就是将短期流动资金转到国外以获取更高的回报率If, Interest rate in foreign country domestic interest rateSo, conversion of domestic currency to foreign currency, and then reconversion of foreign cur

2、rency(including interest) to domestic at the time of maturity. 1Covered and Uncovered Interest Arbitrage 套利套利ContinuedIf there is depreciation of foreign currency during the period of investment (foreign exchange risk)If such foreign exchange risk is covered, we have covered interest arbitrage. (usu

3、ally the risk is covered)If such foreign exchange risk is uncovered, we have uncovered interest arbitrage. 2Uncovered Interest Arbitrage 非非抵抵补性套利补性套利qSuppose the interest rate on three-month treasury bills is 6% at an annual basis in New York, 8% in FrankfurtqA US investor exchange dollars for euros

4、 at the spot rate and purchase EMU treasury bills to earn the extra 2% interest at an annual basis. qWhen the EMU treasury mature, the investor may exchange the euro invested and the interest earned back into dollar.If euro depreciates by 1%, the investor can earn 1% (2%-1%) If euro depreciates by 2

5、%, the investor gains nothingIf euro depreciates by more than 2%, the investor loses 3Carry trade 利差交易利差交易Carry trade is the borrowing of fund in low-yielding currencies and investing in high-yielding currencies. 借出利率低的的货币，兑换投资利率高的货币。Example: “Yen Carry Trade”1.Borrow Yens from Japanese bank at 1% i

6、nterest rate 2. Exchange the yens for U.S. dollars at prevailing rate 3. Then buy U.S. bond paying 4% interest rate If dollar appreciated with respect to the yen by 2%, investor will earn 5% (4%-1%+2%)If dollar to yen depreciated with respect to the yen by 2%, investor will earn 2% (4%-1%-2%)4Carry

7、trade 利差交易利差交易ContinuedIf dollar to yen depreciated with respect to the yen by 2%, investor will earn 2% (4%-1%-2%)If dollar to yen depreciated with respect to the yen by 3%, investor would break even (assuming no transaction cost)If dollar to yen depreciated with respect to the yen by more than 3%,

8、 investor will loss (4%-1%-depreciated rate)qIn theory, in terms of “uncovered interest rate parity”, carry trade should not yield a predictable profit because the difference in interest rates should equal the rate at which investors expect high yielding currency depreciates.qCarry trades tend to we

9、aken the currency that is borrowed, because investor sell the borrowed money to exchange to other currencies. 5Carry trade 利差交易利差交易qCarry trades is often blamed for rapid depreciation of the low-yielding currency and appreciation of high-yielding currency, thus increasing exchange rate volatility.qU

10、S dollar and Japanese yen have been the currencies most heavily used in carry trade transaction since the 1990s, with yen being low-yielding currency and dollar bonds being high-yielding asset.qThat trade largely collapsed in 2008 as a result of the rapid appreciation of the yen. 2008年日元的迅速升值，使得大部分的

11、日元与美元的利差交易停止qThis creates pressure to cover debts denominated in yen by converting foreign assets in to yen, which led to further yen appreciation. 大量外国资产需要转回日元，从而造成日元进一步升值q 6Covered Interest Arbitrage（CIA) 抵补性套利抵补性套利,无风险套利）无风险套利）The investor exchanges the domestic for foreign currency at current sp

12、ot rate in order to purchase the foreign treasury bills, and at the same time the investor sells forward the amount of foreign currency he/she investing in plus the interest he/she will earn so as to coincide with maturity of the foreign investment to cover, or remove, the foreign exchange risk. 用即期

13、利率换来外币，将外币用于购买外国债券，同时签订远期合约卖掉这些外币加上预期利息，用以抵消外汇风险7Covered Interest Arbitrage (CIA)抵补性套利抵补性套利, 无风险套利无风险套利Example for Covered interest arbitrage （抵补套利（抵补套利）:vInterest rate on three-month treasury bills(国债券)is 6% per year in New York (USA), 8% per year in Frankfurt (Germany)vEuro is at forward discount

14、(远期贴水） of 1% per yearUS Investor will:qExchange dollar for euros at the current exchange rate（当前利率）qUse euros to buy the treasury bills in FrankfurtqSelling forward a quantity of euro (=investment amount + interest) at the prevailing forward rate (主流利率）So, the net gain is:(8%-6%) 1%=1% on an annual

15、basis or of 1percent for the three months or quarter of the investment8Covered interest arbitrage parity （CIAP) 抵补性利率平价抵补性利率平价vAs covered interest arbitrage continuesvAs funds are transferred from New York to Frankfurt,the supply of funds in New York decreases the interest rate rises in New York (i

16、) the supply of funds in Frankfurt increases the interest rate falls in Frankfurt (i* )vThe purchase of euros in the spot market increases the spot rate (SR) The sale of euros in the forward market reduces the forward rate (FR)The forward discount rises ( SR-FR ) With (i*-i) , and ( SR-FR) , then th

17、e net gain for both reasonWhen the net gain becomes zero, the euro is said to be at covered interest arbitrage parityInterest differential in favor of the foreign monetary center (i*-i) = forward discount on the foreign currency ( SR-FR) Covered interest arbitrage parity(CIAP) Continued Another exam

18、ple. If euro is at a forward premium 1%,the net gain is (8%-6%) +1%=3% on an annual basis vAs funds are transferred from New York to Frankfurt,the supply of funds in New York diminished the interest rate rises in New York (i ) the supply of funds in Frankfurt increases the interest rate falls in Fra

19、nkfurt (i* )vThe purchase of euros in the spot market increase the spot rate (SR) The sale of euros in the forward market reduce the forward rate (FR)The forward premium decreases until it becomes a forward discount ( SR-FR ) With (i*-i) , and ( SR-FR) , then the net gain for both reason until all o

20、f the gains are once again wiped out, become zero. Through covered interest arbitrage, the spot rate and the forward rate on a currency are closely related. FIGURE 14-4 Covered Interest Arbitrage.Covered Interest Arbitrage Margin抵抵补补性性套套利利润利利润 If it is at the situation of CIAP (covered interest arbi

21、trage parity), i - i*= FD if i i* As , So i i*= (FR-SR)/SRWe define the Covered interest arbitrage margin (CIAM) as CIAM=(i i*)/(1+i*) (FR-SR)/SR 12FD or FP = FR - SRSRDerivation of the Formula for the Covered Interest Arbitrage Margin（公式推导）（公式推导）Covered Interest Arbitrage Margin抵抵补性套补性套利利润利利润 14Exa

22、mple: New York: interest rate of 3 months treasury bill is 6% per yearFrankfurt : interest rate of 3 months treasury bill is 8% per yearSpot rate: $1/1, 3 months forward rate: $0.99/1 CIAM= (0.06-0.08)/(1+0.08) (0.99- 1.00)/ 1= 0.00852 Negative CIAM means CIA outflow (investing in Frankfurt)It indic

23、ates the extra return per dollar invested in Frankfurt is 0.852% per year or 0.213 per quarter (3 months). If investing $10 million, then an extra return of $ 21,300 with the foreign exchange risk covered for three months. Eurocurrency or Offshore Financial Markets离岸金融市场离岸金融市场Eurocurrency（欧洲货币）（欧洲货币

24、） refers to commercial bank deposits outside the country of their issue. 将某货币存储于发行该货币国家以外的银行For example:Eurodollar - A deposit denominated in U.S. dollars in a British commercial bank. 美元存储于英国银行Eurosterling - A pound sterling deposit in a French commercial bank.英镑存储于法国银行Eurodeposit - A deposit in eu

25、ros in a Swiss bank. 欧元存储于瑞士银行15Eurocurrency or Offshore Financial Markets离岸金融市场离岸金融市场vThese balances are usually borrowed or loaned by major international banks, international corporations, and governments when they need to acquire or invest additional funds.需要离岸市场的一般是一些跨国公司，国际银行，还有一些国家。vThe market

26、 in which the borrowing and lending of these balances takes place is the Eurocurrency market or Offshore financial market. 16Eurocurrency or Offshore Financial Markets离岸金融市场离岸金融市场nInitially, only the dollar was used in this fashion, and the market was therefore called the Eurodollar market. 最早是美元存于欧

27、洲银行，被称为欧洲美元市场 nSubsequently, the other leading currencies(German mark, Japanese yen, British pound, French franc, Swiss franc) began also to used in this way, so the market is now called Eurocurrency market.nThe practice of keeping bank deposits denominated in a currency other than that of the natio

28、n in which the deposit is held, has spread to such non-European international monetary centers , such as Tokyo,Hongkong,Singapore, Kuwait（科威特）, Bahama （巴哈马）and Cayman Islands （开曼群岛）in the Caribbean, and are called Offshore deposits.17Eurocurrency or Offshore Financial Markets离岸金融市场离岸金融市场nWith these

29、geographical extensions, the Eurocurrency market has become an essentially 24-hour-a-day operation.由于离岸市场在不同的地区，离岸市场相当于24小时运作nThe Eurocurrency market consists mostly of short-term funds with maturity of less than six months. 离岸市场大多数为短期资本运作。18Case Study 14.6 Size and Growth of Eurocurrency Market19Re

30、asons for the Development and Growth of the Eurocurrency Market 离岸市场发展的缘由离岸市场发展的缘由1. Interest rates on short term deposits abroad are often higher than domestic rates. 境外存储资本利率高于境内vUntil it was abolished in March 1986, Federal Reserve System（美国联邦储备体系） Regulation Q put a ceiling on the interest rates

31、 that US banks could pay on deposits to levels that were often below the rate paid by European bank. vAs a result, short term dollar deposits were attracted to European banks and became Eurodollars. 202. International corporations often find it convenient to hold balances abroad for short periods in

32、 currency they need for payments. 跨国公司觉得短期将资本放在离岸市场再用于支付会更加方便qSince the dollar is the most important international and vehicle currency in making and receiving international payments, a large proportion of the currency to be in Eurodollars. 大量的美元支付都属于Eurodollars3. International corporations can over

33、come domestic credit restrictions by borrowing in the Eurocurrency market.跨国公司不用受制于本国的外汇管制从而轻松在离岸市场借出资金。21Reasons for the Development and Growth of the Eurocurrency Market 离岸市场发展的缘由离岸市场发展的缘由qThe Eurocurrency market originated from the desire of communist nations to keep their dollar deposits outside the Un