商業(yè)財(cái)務(wù)學(xué)英文版教學(xué)課件：Chap017 International Corporate Finance

InternationalCorporateFinanceChapter17Copyright?2011byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinInterpretexchangeratequotesanddescribetheirmeaningDifferentiatebetweenspotandforwardratesSpecifythedistinctionbetweenpurchasingpowerparityandinterestrateparity,andtheimplicationsforchangesinexchangeratesArticulatethebasicsofinternationalcapitalbudgetingDescribetheimpactofpoliticalriskoninternationalbusinessinvestingKeyConceptsandSkills17.1Terminology17.2ForeignExchangeMarketsandExchangeRates17.3PurchasingPowerParity17.4InterestRateParity,UnbiasedForwardRates,andtheInternationalFisherEffect17.5InternationalCapitalBudgeting17.6ExchangeRateRisk17.7PoliticalRiskChapterOutlineAmericanDepositoryReceipt(ADR):asecurityissuedintheU.S.torepresentsharesofaforeignstockCrossrate:theexchangeratebetweentwoforeigncurrencies,e.g.,theexchangeratebetween￡and￥Euro(€):thesinglecurrencyoftheEuropeanMonetaryUnionwhichwasadoptedbyMemberStateson1January1999.Eurobonds:bondsdenominatedinaparticularcurrency(usuallytheissuer’shomecurrency)andissuedsimultaneouslyinthebondmarketsofseveralcountries17.1TerminologyEurocurrency:moneydepositedinafinancialcenteroutsidethehomecountry.EurodollarsaredollardepositsheldoutsidetheU.S.;EuroyenareyendenominateddepositsheldoutsideJapan.Foreignbonds:bondsissuedinanothernation’scapitalmarketbyaforeignborrowerGilts:BritishandIrishgovernmentsecuritiesLIBOR:theLondonInterbankOfferRateistheratemostinternationalbankschargeoneanotherforloansofEurodollarsovernightintheLondonmarketTerminologyWithoutadoubt,theforeignexchangemarketistheworld’slargestfinancialmarket.Inthismarket,onecountry’scurrencyistradedforanother’s.Mostofthetradingtakesplaceinafewcurrencies:U.S.dollar($)Britishpoundsterling(￡)Japaneseyen(￥)Euro(€)

17.2ForeignExchangeMarketsandExchangeRatesTheFOREXmarketisatwo-tieredmarket:InterbankMarket(Wholesale)About700banksworldwidestandreadytomakeamarketinForeignexchange.Nonbankdealersaccountforabout20%ofthemarket.ThereareFXbrokerswhomatchbuyandsellordersbutdonotcarryinventoryandFXspecialists.ClientMarket(Retail)Marketparticipantsincludeinternationalbanks,theircustomers,nonbankdealers,FOREXbrokers,andcentralbanks.FOREXMarketParticipantsThepriceofonecountry’scurrencyintermsofanother.Mostcurrencyisquotedintermsofdollars.Considerthefollowingquote:Euro 1.29167 .77419Thefirstnumber(1.29167)ishowmanyU.S.dollarsittakestobuy1EuroThesecondnumber(.77419)ishowmanyEurosittakestobuy$1Thetwonumbersarereciprocalsofeachother(1/1.1.29167=.77419)ExchangeRatesSupposeyouhave$10,000.BasedontheratesinFigure20.1,howmanySwissFrancscanyoubuy?Exchangerate=1.1181FrancsperdollarBuy10,000(1.0441)=10,441FrancsSupposeyouarevisitingBombayandyouwanttobuyasouvenirthatcosts1,000IndianRupees.HowmuchdoesitcostinU.S.dollars?Exchangerate=45.851rupeesperdollarCost=1,000/45.851=$21.81ExampleSupposethatSDM(0)=.50

i.e.,$1=2DMinthespotmarketandthatS￥(0)=100

i.e.,$1=￥100WhatmusttheDM/￥crossratebe?CrossRatesTriangularArbitrage$￡￥CreditLyonnaisS￡(0)=1.50CreditAgricoleS￥/￡(0)=85BarclaysS￥(0)=120Supposeweobservethesebankspostingtheseexchangerates.Firstcalculatetheimpliedcrossratestoseeifanarbitrageexists.TriangularArbitrage$￡￥CreditLyonnaisS￡(0)=1.50CreditAgricoleS￥/￡(0)=85BarclaysS￥(0)=120TheimpliedS(￥/￡)crossrateisS(￥/￡)=80CreditAgricolehaspostedaquoteofS(￥/￡)=85,sothereisanarbitrageopportunity.So,howcanwemakemoney?￡1.50$1×$1￥120=￡1￥80TriangularArbitrage$￡￥CreditLyonnaisS￡(0)=1.50CreditAgricoleS￥/￡(0)=85BarclaysS￥(0)=120Aseasyas1–2–3:1.Sellour$for￡,2.Sellour￡for￥,3.Sellthose￥for$.TriangularArbitrageSell$100,000for￡atS￡(0)=1.50receive￡150,000Sellour￡150,000for￥atS￥/￡(0)=85receive￥12,750,000Sell￥12,750,000for$atS￥(0)=120receive$106,250profitperroundtrip=$106,250–$100,000=$6,250Spottrade–exchangecurrencyimmediatelySpotrate–theexchangerateforanimmediatetradeForwardtrade–agreetodaytoexchangecurrencyatsomefuturedateandsomespecifiedprice(alsocalledaforwardcontract)Forwardrate–theexchangeratespecifiedintheforwardcontractIftheforwardrateishigherthanthespotrate,theforeigncurrencyissellingatapremium(whenquotedas$equivalents).Iftheforwardrateislowerthanthespotrate,theforeigncurrencyissellingatadiscount.TypesofTransactionsPriceofanitemisthesameregardlessofthecurrencyusedtopurchaseit.RequirementsforabsolutePPPtohold:TransactioncostsarezeroNobarrierstotrade(notaxes,tariffs,etc.)NodifferenceinthecommoditybetweenlocationsFormostgoods,AbsolutePPPrarelyholdsinpractice.AbsolutePurchasingPowerParityProvidesinformationaboutwhatcauseschangesinexchangerates.Thebasicresultisthatexchangeratesdependonrelativeinflationbetweencountries:E(St)≈S0[1+(hFC–hUS)]TBecauseabsolutePPPdoesn’tholdformanygoods,wewillfocusonrelativePPPfromhereonout.RelativePurchasingPowerParitySupposetheCanadianspotexchangerateis1.18CanadiandollarsperU.S.dollar.U.S.inflationisexpectedtobe3%peryear,andCanadianinflationisexpectedtobe2%.DoyouexpecttheU.S.dollartoappreciateordepreciaterelativetotheCanadiandollar?SinceinflationishigherintheU.S.,wewouldexpecttheU.S.dollartodepreciaterelativetotheCanadiandollar.Whatistheexpectedexchangerateinoneyear?E(S1)=1.18[1+(.02-.03)]1=1.1682ExampleIRPisanarbitragecondition.IfIRPdidnothold,thenitwouldbepossibleforanastutetradertomakeunlimitedamountsofmoneyexploitingthearbitrageopportunity.Sincewedon’ttypicallyobservepersistentarbitrageconditions,wecansafelyassumethatIRPholds.17.4InterestRateParitySupposeyouhave$100,000toinvestforoneyear.YoucaneitherInvestintheU.S.ati$.Futurevalue=$100,000×(1+i$)Tradeyourdollarsforyenatthespotrate,investinJapanati￥andhedgeyourexchangerateriskbysellingthefuturevalueoftheJapaneseinvestmentforward.InterestRateParityFS×(1+i￥)=(1+i$)FS×(1+i￥)Futurevalue=$100,000×Sincebothoftheseinvestmentshavethesamerisk,theymusthavethesamefuturevalue:Formally, InterestRateParityIRPissometimesapproximatedasFS×(1+i￥)=(1+i$)FS=(1+i$)(1+i￥)orifyouprefer,

i$

–

i￥≈F–SSIfIRPfailedtohold,anarbitrageopportunitywouldexist.It’seasiesttoseethisintheformofanexample.Considerthefollowingsetofforeignanddomesticinterestratesandspotandforwardexchangerates.IRPandCoveredInterestArbitrageSpotexchangerateS￡(0)=$1.25/￡360-dayforwardrateF￡(360)=$1.20/￡U.S.discountratei$=7.10%Britishdiscountratei￡

=11.56%Atraderwith$1,000toinvestcouldinvestintheU.S.;inoneyearhisinvestmentwillbeworth$1,071=$1,000(1+i$)=$1,000(1.071).Alternatively,thistradercould:exchange$1,000for￡800attheprevailingspotrate,(notethat￡800=$1,000÷$1.25/￡)invest￡800ati￡=11.56%foroneyeartoachieve￡892.48.Translate￡892.48backintodollarsatF￡(360)=$1.20/￡;the￡892.48willbeexactly$1,071.IRPandCoveredInterestArbitrageIRPandCoveredInterestArbitrage…caninvestintheU.S.Inoneyearhisinvestmentwillbeworth$1,071=$1,000(1.071)=$1,000(1+i$)Atraderwith$1,000toinvest…$1,071=￡892.48×￡1$1.20BringitonbacktotheU.S.A.IRPandCoveredInterestArbitrage$1,000￡800￡800=$1,000×￡1$1.25Invest￡800ati￡=11.56%Inoneyear￡800willbeworth￡892.48=$1,000(1+i￡)DomesticFV=$1,071andBritishFV=$1,071TransactionsCostsTheinterestrateavailabletoanarbitrageurforborrowing,ib,mayexceedtheratehecanlendat,il.Theremaybebid-askspreadstoovercome,Fb/Sa<F/S

Thus(Fb/Sa)(1+i￥l)(1+i￥b)0CapitalControlsGovernmentssometimesrestrictimportandexportofmoneythroughtaxesoroutrightbans.ReasonsforDeviationsfromIRPCombiningPPPandUIPwecangettheInternationalFisherEffect:RUS–hUS=RFC–hFCTheInternationalFisherEffecttellsusthattherealrateofreturnmustbeconstantacrosscountries.Ifitisnot,investorswillmovetheirmoneytothecountrywiththehigherrealrateofreturn.InternationalFisherEffectHomeCurrencyApproachEstimatecashflowsinforeigncurrencyEstimatefutureexchangeratesusingUIPConvertfuturecashflowstodollarsDiscountusingdomesticrequiredreturnForeignCurrencyApproachEstimatecashflowsinforeigncurrencyUsetheIFEtoconvertdomesticrequiredreturntoforeignrequiredreturnDiscountusingforeignrequiredreturnConvertNPVtodollarsusingcurrentspotrate17.5InternationalCapitalBudgetingYourcompanyislookingatanewprojectinMexico.Theprojectwillcost9millionpesos.Thecashflowsareexpectedtobe2.25millionpesosperyearfor5years.Thecurrentspotexchangerateis9.08pesosperdollar.Therisk-freerateintheUSis4%,andtherisk-freerateinMexico8%.Thedollarrequiredreturnis15%.Shouldthecompanymaketheinvestment?HomeCurrencyApproachUsethesameinformationasthepreviousexampletoestimatetheNPVusingtheForeignCurrencyApproachMexicaninflationratefromtheInternationalFisherEffectis8%-4%=4%RequiredReturn=15%+4%=19%PVoffuturecashflows=6,879,679NPV=6,879,679–9,000,000=-2,120,321pesosNPV=-2,120,321/9.08=-233,516ForeignCurrencyApproachShort-RunExposureLong-RunExposureTranslationExposure17.6ExchangeRateRiskRiskfromday-to-dayfluctuationsinexchangeratesandthefactthatcompanieshavecontractstobuyandsellgoodsintheshortrunatfixedpricesManagingriskEnterintoaforwardagreementtoguaranteetheexchangerate.Useforeigncurrencyoptionstolockinexchangeratesiftheymoveagainstyou,butbenefitfromratesiftheymoveinyourfavor.Short-RunExposureLong-runfluctuationscomefromunanticipatedchangesinrelativeeconomicconditionsCouldbeduetochangesinlabormarketsorgovernmentsMoredifficulttohedgeTrytomatchlong-runinflowsandoutflowsinthecurrencyBorrowingintheforeigncountrymaymitigatesomeoftheproblemsLong-RunExposureIncomefromforeignoperationsmustbetranslatedbacktoU.S.dollarsforaccountingpurposes,evenifforeigncurrencyisnotactuallyconvertedbacktodollars.Ifgainsandlossesfromthistranslationflowedthroughdirectlytotheincomestatement,therewouldbesignificantvolatilityinEPS.Currentaccountingregulationsrequirethatallcashflowsbeconvertedattheprevailingexchangerates,withcurrencygainsandlossesaccumulatedinaspecialaccountwithinshareholdersequity.TranslationExposureLargemultinationalfirmsmayneedtomanagetheexchangerateriskassociatedwithseveraldifferentcurrencies.Thefirmneeds