tailieunhanh - Lecture Global financial management - Topic 2: Foreign exchange rate systems, determinants and the effects of revaluation
In this chapter, students can obtain and interpret exchange rates, students can convert currencies using direct and indirect quotes and cross rates, students can compute and interpret currency appreciations and depreciations, students can forecast appreciations using PPP and IRP. | Topic #2: Foreign Exchange Rate Systems, Determinants and The Effects of Revaluation L. Gattis Global Financial Management 1 Learning Objectives 2 Learning Objectives Evaluate the advantages and disadvantages of alternative systems (Free Floating, Fixed, Managed Float) for the determination of exchange rates Understand the determinants of exchange rates (qualitative) How to forecast (quantitative) exchange rates using models: purchasing power parity, relative purchasing power parity, interest rate parity, an unbiased forward rate. “I’m not a financial manager, so why should I care about exchange rates?” 3 Supply Chain: Exchange rates affect the cost of distribution, outsourcing, international production costs Marketing: Exchange rates affect the price of your product abroad, . dollar revenues, and competitive positions versus substitute producers Accounting: Exchange rates affect the USD value of liabilities and assets and require revaluations and restatements Economics: An exchange rate is barometers of the health of nation by incorporating factors such as growth, inflation, demand for exports, budget deficits, investment attractiveness. Investors: exchange rates affect the USD return of foreign investments Political Science: The politics, economics, and business implication of exchange rates allows you to more fully understand the incentives of Eurozone members. Tourists: A strong dollar reduces the USD cost of foreign goods and services Exchange Rates Basics 4 An exchange rate is the price of one currency in terms of another. Exchange rates are quoted in either direct ($/FX) or indirect terms (FX/$) for Americans Direct Exchange Rates . dollar (USD) price of one unit of a foreign currency Examples: $€ (Euro), $£ (British Pound) When a direct quote increases --- the foreign currency is appreciating, USD is depreciating Indirect Exchange Rates Foreign price of one . dollar Examples: Brazilian Rial ($), Chilean Peso (P700/$), Peruvian Nuevo | Topic #2: Foreign Exchange Rate Systems, Determinants and The Effects of Revaluation L. Gattis Global Financial Management 1 Learning Objectives 2 Learning Objectives Evaluate the advantages and disadvantages of alternative systems (Free Floating, Fixed, Managed Float) for the determination of exchange rates Understand the determinants of exchange rates (qualitative) How to forecast (quantitative) exchange rates using models: purchasing power parity, relative purchasing power parity, interest rate parity, an unbiased forward rate. “I’m not a financial manager, so why should I care about exchange rates?” 3 Supply Chain: Exchange rates affect the cost of distribution, outsourcing, international production costs Marketing: Exchange rates affect the price of your product abroad, . dollar revenues, and competitive positions versus substitute producers Accounting: Exchange rates affect the USD value of liabilities and assets and require revaluations and restatements Economics: An .
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