Valuing Floating Rate Notes (FRN) in Excel/VBA
... and its price shows very low sensitivity to changes in market rates. When market rates rise, the expected coupons of the FRN increase in line with the increase in forward rates, which means its price remains constant. Thus, FRNs differ from fixed rate bonds, whose prices decline when market rates ri ...
... and its price shows very low sensitivity to changes in market rates. When market rates rise, the expected coupons of the FRN increase in line with the increase in forward rates, which means its price remains constant. Thus, FRNs differ from fixed rate bonds, whose prices decline when market rates ri ...
Appreciation of the exchange rate
... Scotland: if it moved 1 unit of labour from whisky to oil it would sacrifice 40 litres of whisky but gain 20 barrels of oil (OC = 40/20 = 2) Moving 1 unit of labour from oil to whisky production would lead to a sacrifice of 20 barrels of oil to gain 40 litres of whisky (OC of whisky is ...
... Scotland: if it moved 1 unit of labour from whisky to oil it would sacrifice 40 litres of whisky but gain 20 barrels of oil (OC = 40/20 = 2) Moving 1 unit of labour from oil to whisky production would lead to a sacrifice of 20 barrels of oil to gain 40 litres of whisky (OC of whisky is ...
Midterm 3
... Although the exchange rate has been floating in the past, the government does not want the exchange rate to change suddenly, and intervenes in the foreign exchange market to maintain the exchange rate at the original level. Therefore the central bank intervenes in the foreign exchange market to prev ...
... Although the exchange rate has been floating in the past, the government does not want the exchange rate to change suddenly, and intervenes in the foreign exchange market to maintain the exchange rate at the original level. Therefore the central bank intervenes in the foreign exchange market to prev ...
Solutions to BA 178 Midterm Exam B Summer 2007
... For the total of 6 points of above, take 0.5 point off each if no example is given. ...
... For the total of 6 points of above, take 0.5 point off each if no example is given. ...
The Small Open Economy - The Economics Network
... case however it is the world interest rate (r*) that dominates the small open economy. Much like a perfect competitor is a price taker the small open economy is an interest rate taker. Domestic investors always have access to the world interest rates and their economy is so small it can not affect t ...
... case however it is the world interest rate (r*) that dominates the small open economy. Much like a perfect competitor is a price taker the small open economy is an interest rate taker. Domestic investors always have access to the world interest rates and their economy is so small it can not affect t ...
Chapter 6
... rate system, exchange rates are allowed to move freely on a daily basis and no official boundaries exist. However, governments may intervene to prevent the rates from moving too much in a certain direction. ...
... rate system, exchange rates are allowed to move freely on a daily basis and no official boundaries exist. However, governments may intervene to prevent the rates from moving too much in a certain direction. ...
China’s RenMinBi Strategy* C.P. Chandrasekhar and Jayati Ghosh
... And these possibilities in turn also affect investor perceptions and capital flows. Indeed, many developing countries (including India) experienced both currency market and stock market volatility and downturn in the immediate aftermath of this move. Such countries are caught in a double bind, with ...
... And these possibilities in turn also affect investor perceptions and capital flows. Indeed, many developing countries (including India) experienced both currency market and stock market volatility and downturn in the immediate aftermath of this move. Such countries are caught in a double bind, with ...
Press release on the value of the discount rate of the National Bank
... signs of fiscal consolidation were observed, positive balance of payments was maintained. At the same time members of the Board noted that the quality of economic growth raised main concerns, as it was driven mainly by reduction of the volume of production at Kumtor. Also of concern is the trade bal ...
... signs of fiscal consolidation were observed, positive balance of payments was maintained. At the same time members of the Board noted that the quality of economic growth raised main concerns, as it was driven mainly by reduction of the volume of production at Kumtor. Also of concern is the trade bal ...
The Costs of a Single Currency
... One-for-one if “V” (velocity of circulation) constant. Could use MS/MD graph, with P or 1/P on y-axis • “Classical dichotomy” and “Monetary Neutrality”: Money increase has no effect on real variables, including real GDP, unemployment, real wages and real interest rates (but via the Fisher effect the ...
... One-for-one if “V” (velocity of circulation) constant. Could use MS/MD graph, with P or 1/P on y-axis • “Classical dichotomy” and “Monetary Neutrality”: Money increase has no effect on real variables, including real GDP, unemployment, real wages and real interest rates (but via the Fisher effect the ...
Session 5.3
... above? 1. External shocks – though the evidence is contradictory – it may have been worse in EA 2. Overborrowing in LA – important but contradictory evidence – significant borrowing occurred in EA too – the key is in the way in which it was managed a. Examples: Korea and Thailand had larger current ...
... above? 1. External shocks – though the evidence is contradictory – it may have been worse in EA 2. Overborrowing in LA – important but contradictory evidence – significant borrowing occurred in EA too – the key is in the way in which it was managed a. Examples: Korea and Thailand had larger current ...
Answer Key for Problem Set 4
... exchange rate. In the long run, as the output will be at the full employment level, there is no need for government to implement any policy. 2. (Chap 17). A new government is elected and announces that once it is inaugurated, it will increase money supply permanently. (a) Use the DD-AA model to stud ...
... exchange rate. In the long run, as the output will be at the full employment level, there is no need for government to implement any policy. 2. (Chap 17). A new government is elected and announces that once it is inaugurated, it will increase money supply permanently. (a) Use the DD-AA model to stud ...
Homework 1
... Multiple Choice (½ point each) 1. Which of the following is NOT included in GDP calculated using the expenditure method? A) government purchases of non-durable goods B) government social welfare payments C) residential investment D) exports of services ________B__________ ...
... Multiple Choice (½ point each) 1. Which of the following is NOT included in GDP calculated using the expenditure method? A) government purchases of non-durable goods B) government social welfare payments C) residential investment D) exports of services ________B__________ ...
FX and the Demographic Divide: Indian Rupee vs U.S. Dollar
... dollar. And, fiscal policy, which might be used for tax reform or structural spending, both of which offer some potential to encourage U.S. economic growth, appear off the table in these times of highly-polarized U.S. politics and PresidentialCongressional gridlock. From a policy perspective, India ...
... dollar. And, fiscal policy, which might be used for tax reform or structural spending, both of which offer some potential to encourage U.S. economic growth, appear off the table in these times of highly-polarized U.S. politics and PresidentialCongressional gridlock. From a policy perspective, India ...
Chapter 18. Openness in Goods
... called a trade deficit, and a positive one a trade surplus. In the closed economy model developed earlier in the book, domestic residents made only one decision—how much to spend. In an open economy, domestic residents make two decisions—how much to spend and how much to spend on domestic (as oppose ...
... called a trade deficit, and a positive one a trade surplus. In the closed economy model developed earlier in the book, domestic residents made only one decision—how much to spend. In an open economy, domestic residents make two decisions—how much to spend and how much to spend on domestic (as oppose ...
Lecture 12: Purchasing power parity and the law of one price.
... of goods may cost the same even if the prices of individual goods di¤er) – Absolute PPP implies relative PPP if the same basket of goods is used in the comparisons. To see this, note that ...
... of goods may cost the same even if the prices of individual goods di¤er) – Absolute PPP implies relative PPP if the same basket of goods is used in the comparisons. To see this, note that ...
What is the nominal exchange rate?
... The real exchange rate compares the prices of domestic goods and foreign goods in the domestic economy. If a kilo of Swiss cheese beer is twice as expensive as a kilo of English cheese, the real exchange rate is 1/2 a kilo of Swiss cheese per kilo of English cheese. The real exchange rate depends on ...
... The real exchange rate compares the prices of domestic goods and foreign goods in the domestic economy. If a kilo of Swiss cheese beer is twice as expensive as a kilo of English cheese, the real exchange rate is 1/2 a kilo of Swiss cheese per kilo of English cheese. The real exchange rate depends on ...
EconS 327 Review for Test 2 1 Test 2 is scheduled for Friday, April
... 7. The figure above shows the current demand and supply of the British pound. If the British government wants to peg the exchange rate of the pound at $2.50 per pound, what action would British monetary authorities have to undertake? a. Sell 1 million pounds and buy 2.5 million dollars. b. Buy 1 mil ...
... 7. The figure above shows the current demand and supply of the British pound. If the British government wants to peg the exchange rate of the pound at $2.50 per pound, what action would British monetary authorities have to undertake? a. Sell 1 million pounds and buy 2.5 million dollars. b. Buy 1 mil ...
slides - Harvard University
... bond market just to facilitate internationalization? • No. But there are other more important reasons to develop a euro bond anyway: – to help the ECB conduct monetary policy, • by offering an asset to buy in QE, in place of national bonds; • but also in normal times, before the crisis, – so that na ...
... bond market just to facilitate internationalization? • No. But there are other more important reasons to develop a euro bond anyway: – to help the ECB conduct monetary policy, • by offering an asset to buy in QE, in place of national bonds; • but also in normal times, before the crisis, – so that na ...
The Case for Exchange Rate Flexibility: The Chilean Experience
... to a managed exchange rate. Very limited period and size of the intervention. Transparent: time frame and magnitudes announced at the beginning, as well as the reasons for intervention. This helps to prevent interventionism lobby, in either direction. In my view is a first line of defense in case of ...
... to a managed exchange rate. Very limited period and size of the intervention. Transparent: time frame and magnitudes announced at the beginning, as well as the reasons for intervention. This helps to prevent interventionism lobby, in either direction. In my view is a first line of defense in case of ...
Monetary-Policy
... What do the MPC look at when deciding if inflation might become too high / too low… Exchange Rate Rate of GDP Growth ...
... What do the MPC look at when deciding if inflation might become too high / too low… Exchange Rate Rate of GDP Growth ...
Exchange rate
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In finance, an exchange rate (also known as a foreign-exchange rate, forex rate, FX rate or Agio) between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency. For example, an interbank exchange rate of 119 Japanese yen (JPY, ¥) to the United States dollar (US$) means that ¥119 will be exchanged for each US$1 or that US$1 will be exchanged for each ¥119. In this case it is said that the price of a dollar in terms of yen is ¥119, or equivalently that the price of a yen in terms of dollars is $1/119.Exchange rates are determined in the foreign exchange market, which is open to a wide range of different types of buyers and sellers where currency trading is continuous: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday. The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.In the retail currency exchange market, a different buying rate and selling rate will be quoted by money dealers. Most trades are to or from the local currency. The buying rate is the rate at which money dealers will buy foreign currency, and the selling rate is the rate at which they will sell the currency. The quoted rates will incorporate an allowance for a dealer's margin (or profit) in trading, or else the margin may be recovered in the form of a commission or in some other way. Different rates may also be quoted for cash (usually notes only), a documentary form (such as traveler's cheques) or electronically (such as a credit card purchase). The higher rate on documentary transactions has been justified to compensate for the additional time and cost of clearing the document, while the cash is available for resale immediately. Some dealers on the other hand prefer documentary transactions because of the security concerns with cash.