國際金融（英文版）Chapter5ModelsofExchange-rateDetermination

Chapter5

Modelsoftheforeignexchangedetermination5.1PurchasingpowerparityThetheorylinkinginflationandexchangeratemovementsisknownaspurchasingpowerparity(PPP).ThelawofonepriceThetheoryofPPPisbasedonthelawofoneprice(LOP).Thelawofonepricestatesthatidenticalcommoditiesorgoodsmusthavethesamepriceinallmarkets.AbsoluteandrelativePPPThisrelationrepresentstheabsoluteformofPPPandisveryrestrictive.TherelativeformofPPP,morecommonlyusedtoday,islessrestrictivethantheabsoluteform.Itstatesthatincomparisontoaperiodwhenexchangerateswereinequilibrium,changesintheratioofdomestictoforeignpricesindicatetheappropriateadjustmentintheexchangerate.TheempiricalevidenceWhetherornotPPPholdsisanongoingcontroversy.Thereasonswhyitmightnotholdarenumerous.ThestrictestformofPPPrequiresthat:--financialmarketsareperfectwithnocontrols,taxes,transactioncosts,etc;--goodsmarketsareperfectwithinternationalshipmentofgoodsabletotakeplacefreely,instantaneouslyandwithoutcost;--thereisasingleconsumptiongoodcommontoeveryone;--thesamecommoditiesappearinthesameproportionsineachcountry’sconsumptionbasket.Reasonsfordivergencefromshort-termPPPTheassetmarketapproachOvershootingTheportfoliobalanceapproach5.2CoveredinterestparityBackgroundTheCIPconditionConsideraninvestorwhohasinitialcapital,K,andfacestwoalternatives:(i)domesticinvestment,wherebytheinvestorbuysdomesticassets,earningthedomesticinterestrate,i;(ii)foreigninvestment,wherebytheinvestorconvertsthedomesticcurrencyintoforeigncurrencytobuyforeignassets,earningtheforeigninterestrate,i*.ThemechanicsofcoveredarbitrageArbitragefromthedomesticcurrencytoaforeigncurrencyorapproximatelyTheno-arbitrageconditionArbitragefromaforeigncurrencytothedomesticcurrencyorapproximatelyCoveredarbitragewithbid-offerspreadsArbitragefromthedomesticcurrencytoaforeigncurrencyArbitragefromaforeigncurrencytothedomesticcurrency5.3Marketefficiency,uncoveredinterestparityandrealinterestparityTheconceptofmarketefficiencyInanefficientmarket,pricesreflectallavailableinformation.Hence,thisisadefinitionofinformationalefficiencyratherthanallocativeefficiency.Inthissensemarketefficiencyprecludesthepossibilityofearningprofitviaarbitrageandspeculationbasedontheviolationoftheseconditions.WeakefficiencyWeakefficiencymeansthatpricesreflectalltheinformationcontainedinthepastbehaviorofprices(orratherexchangerates).Thisisobviouslyalimitedsetofinformationasitexcludestheeffectofotherrelevantvariablesthat,inthecaseoftheforeignexchangemarket,affecttheexchangerate.Semi-strongefficiencySemi-strongefficiencyimpliesthattheinformationsetcontainsnotonlythepastbehaviorofexchangerates,butalsoallpubliclyavailableinformation.StrongefficiencyStrongefficiencyimpliesthatpricesreflectallavailableinformation,includingprivateinformationandinsiderinformation.Itisnormallyarguedthatthislevelofefficiencydoesnotapplytotheforeignexchangemarketbecause,unlikethestockmarket,insiderinformationisnotimportant.SpotandforwardmarketefficiencyTheefficiencyofthespotforeignexchangemarketimpliesthatspotexchangeratesmoveinarandomandunpredictablemanner,reflectingtherandomarrivalofnewinformation.Therandomwalkbehaviormayberepresentedbytheequation:Theconceptofforwardmarketefficiencyencompassesboththespotandforwardmarkets.Theuncoveredinterestparity(UIP)conditionisdescribedas‘uncovered’becauseitisrestoredandmaintainedbyuncoveredarbitrage.UncoveredinterestparityThemechanicsofuncoveredinterestarbitrageArbitragefromthedomesticcurrencytoaforeigncurrencyArbitragefromaforeigncurrencytothedomesticcurrencyTherealinterestparity(RIP)hypothesispostulatesthat,iftheworldmarketsforgoods,capitalandforeignexchangeareintegrated,realinterestratesonperfectlycomparablefinancialassetstendtobeequalizedacrosscountriesovertime.Realinterestparity:theconceptoftherealinterestrateCurrencyriskor(asitisoftencalled)foreignexchangeriskreferstofluctuationsinthedomesticcurrencyvalueofassets,liabilities,incomeorexpenditureduetounanticipatedchangesinexchangerates.5.4ForeignexchangeriskmanagementTheexposuretobehedgedcanarisefromacommercialtransaction,aforeigninvestmentoraliabilityinforeigncurrency.

Itcanalsobelongorshort.HedgingwithforwardcontractsHedgingalongpositionFigure5.5HedgingalongpositionHedgingashortpositionFigure5.6HedgingashortpositionForwarddiscountsandpremiums:longpositionsFigure5.7HedgingalongpositionwithaforwarddiscountFigure5.8HedgingalongpositionwithaforwardpremiumForwarddiscountsandpremiums:shortpositionsFigure5.9HedgingashortpositionwithaforwardpremiumHedgingviathespotmarketRollingoverandclosingoutforwardcontractsTheorganizedfuturesmarketshavefourimportantfeatures:--thecontractsarestandardized;--tradingtakesplaceinonelocation;--contractsaresettledthroughthe