# 4. International Parity Conditions

Save this PDF as:

Size: px
Start display at page:

## Transcription

1 4. Inernaional ariy ondiions 4.1 urchasing ower ariy he urchasing ower ariy ( heory is one of he early heories of exchange rae deerminaion. his heory is based on he concep ha he demand for a counry's currency is derived from he demand for he goods ha his counry produces. hus, he exchange rae for a cerain counry's currency depends on he demand for he goods produced in ha counry. If prices of goods are low relaive o hose in oher counries, hen his exchange rae will be high. he relaionship is imporan because i ells us wheher changes in he nominal exchange rae have an impac on real variables such as he value of a firm or he reurn on a porfolio of asses. ommodiy rice ariy (: Arbirage in perfec goods marke implies ha a paricular good mus have he same price across differen counries, afer ranslaion ino a common currency. ha is, if he price of he same commodiy were no he same across counries, hen one could make profis by buying he commodiy in he counry where i is cheap and selling i where i is more expensive. can be expressed as follows: S( D / AD k k his relaion saes ha he price of commodiy "k" mus be he same in boh anada and he Unied Saes.

5 Finally, he oupu of he forward ransacion will be: f ADY F, ( AD / D DX F, f DX ( D / AD he oupu of his overall invesmen is hen: F ( D / AD f, DX (1 + r, S ( D / AD DX Our arbirage argumen requires ha: h DX DX DX DX f he I condiion is hen: (1 + r, (1 + r hese ransacions can be shown on a diagram., F, ( D / AD S ( D / AD 4.3 Uncovered Ineres ariy Anoher widely discussed ineres pariy condiion is called he Uncovered Ineres ariy (UI condiion. o undersand UI, we mus firs discuss he forward rae as an unbiased predicor of fuure spo rae. he Forward Rae as an Unbiased redicor of Fuure Spo Raes: UI is based on he noion ha, under efficien and perfec markes, he forward exchange rae mus be an unbiased predicor of he fuure spo exchange rae. ha is, if he forward rae is an unbiased predicor of he fuure spo rae, he expeced value of he fuure spo rae given all he informaion available oday mus equal he presen forward rae: F E { S, }

6 An unbiased predicor, however, does no mean ha he fuure spo rae will acually be equal o he forward rae. Unbiased predicion only means ha he fuure spo rae will, on average, equal he forward rae. he raionale for his relaionship is based on he hypohesis ha he foreign exchange marke is efficien. Marke efficiency assumes ha all relevan informaion is quickly refleced in boh he spo and forward exchange markes, ha ransacion coss are low or nonexisen, and ha insrumens denominaed in differen currencies are perfec subsiues for one anoher. Empirical sudies on marke efficiency have yielded conflicing resuls. ha is, here appear o be a risk premium on he forward marke: F, E{ S } + R, he Uncovered Ineres ariy ondiion: he UI condiion is simply: ( 1 + r, (1 + r, E{ S } S he linear version of his condiion is widely used in exchange rae deerminaion models. he linear version is (a * denoes foreign counry variables: * E{ S } S r, r, + S his condiion has a diagrammaic exposiion. his diagram is useful o undersand he impac of news on exchange raes. he lef side of he equaion represens domesic reurn and he lef side of he equaion is he foreign reurn. Oher hings being equal, any news you obain abou he fuure spo exchange rae will be refleced in he curren spo rae. 4.4 Real Ineres ariy his las condiion is based on boh UI and. I is called real in ha i relaes he real reurns from asses across counries.

7 he Fisher Effec: he Fisher effec saes ha he nominal ineres rae is equal o he real ineres rae plus compensaion for expeced inflaion. he Fisher relaion is: Where ρ is he real ineres rae and π is he expeced inflaion rae. he nominal ineres rae describes he rae of reurn from an asse, in erms of unis of currency. he real ineres rae, however, is he rae of reurn from his asse, in erms of unis of a baske of goods ha can be purchased. Inflaion erodes he real value of a currency, because i is a general and susained increase in he price level of he baske of goods. hus, o obain he real ineres rae, we mus subrac inflaion from he nominal reurn. he linear version of his relaion is: ( 1 + ρ (1 + π, (1 + r,, r r, ρ, + π, he Inernaional Fisher Effec: he inernaional Fisher effec, or Fisher-open, saes ha he spo exchange rae should change in an equal amoun bu in he opposie direcion o he difference in ineres raes beween wo counries. his relaion is based on UI, Relaive, and he Fisher effec. For example, UI is: (1 + r, (1 + r *, E{ S } S he bes forecas of Relaive is: (1 + π + *, (1 π, E { S } S Finally, he Fisher effec is: (1 + ρ he inernaional fisher relaion is:, (1 + r (1 + π (1 + ρ (1 + ρ *,,,,

8 he Real Exchange Rae: he previous derivaion was underaken wih he idea ha holds. If his is no he case, here is a real version of UI ha can be esablished. his new condiion saes ha he real reurn from risk-free asses wih idenical mauriy should be equaed across counries, afer ranslaion in a baske of goods. his pariy condiion relaes he real reurn o invesmen a home and abroad, and changes in he real exchange rae. his pariy is: (1 + ρ + *, (1 ρ, E ( Q Q 4.5 Summary saes ha a paricular commodiy mus have he same price across differen counries, afer ranslaion ino a common currency. Several reasons migh explain violaions of : ransacion coss, nonraded goods, quoas, and imperfec compeiion. Absolue saes ha a paricular commodiy baske mus have he same price across differen counries, afer ranslaion ino a common currency. will likely be violaed if is iself violaed and if baskes are differen across counries. he Relaive hypohesis saes ha he percenage change in he exchange rae reflecs he difference beween inflaion a home and abroad. he real exchange rae is he relaive price of a foreign baske of goods. I provides informaion abou he compeiiveness and he coss of living of counries. In he long run, his real exchange rae is deermined by he supply and demand for baskes of goods.

9 he arbirage condiion called he overed Ineres ariy (I condiion saes ha he prices from risk-free asses wih idenical mauriy should be equaed across counries, afer ranslaion in a common currency. Uncovered Ineres ariy (UI is based on he noion ha, under efficien and perfec markes, he forward exchange rae mus be an unbiased predicor of he fuure spo exchange rae. he Fisher effec saes ha he nominal ineres rae is equal o he real ineres rae plus compensaion for expeced inflaion.

### 1. Explain why the theory of purchasing power parity is often referred to as the law of one price.

Chaper Review Quesions. xplain why he heory of purchasing power pariy is ofen referred o as he law of one price. urchasing ower ariy () is referred o as he law of one price because he deerminaion of he

### Lecture Note on the Real Exchange Rate

Lecure Noe on he Real Exchange Rae Barry W. Ickes Fall 2004 0.1 Inroducion The real exchange rae is he criical variable (along wih he rae of ineres) in deermining he capial accoun. As we shall see, his

### Chapter 8: Regression with Lagged Explanatory Variables

Chaper 8: Regression wih Lagged Explanaory Variables Time series daa: Y for =1,..,T End goal: Regression model relaing a dependen variable o explanaory variables. Wih ime series new issues arise: 1. One

### What is a swap? A swap is a contract between two counter-parties who agree to exchange a stream of payments over an agreed period of several years.

Currency swaps Wha is a swap? A swap is a conrac beween wo couner-paries who agree o exchange a sream of paymens over an agreed period of several years. Types of swap equiy swaps (or equiy-index-linked

### Derivatives. Forwards and Futures. Forward. Futures. Options. Initial Cost

Derivaives Forwards and Fuures A derivaive securiy is a securiy whose value depends on he values of oher more basic underlying variables. Forward The mos common derivaive securiies are forward, fuures

### A Brief Introduction to the Consumption Based Asset Pricing Model (CCAPM)

A Brief Inroducion o he Consumpion Based Asse Pricing Model (CCAPM We have seen ha CAPM idenifies he risk of any securiy as he covariance beween he securiy's rae of reurn and he rae of reurn on he marke

### 11/6/2013. Chapter 14: Dynamic AD-AS. Introduction. Introduction. Keeping track of time. The model s elements

Inroducion Chaper 14: Dynamic D-S dynamic model of aggregae and aggregae supply gives us more insigh ino how he economy works in he shor run. I is a simplified version of a DSGE model, used in cuing-edge

### BALANCE OF PAYMENTS. First quarter 2008. Balance of payments

BALANCE OF PAYMENTS DATE: 2008-05-30 PUBLISHER: Balance of Paymens and Financial Markes (BFM) Lena Finn + 46 8 506 944 09, lena.finn@scb.se Camilla Bergeling +46 8 506 942 06, camilla.bergeling@scb.se

### INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS

INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS Ilona Tregub, Olga Filina, Irina Kondakova Financial Universiy under he Governmen of he Russian Federaion 1. Phillips curve In economics,

### YTM is positively related to default risk. YTM is positively related to liquidity risk. YTM is negatively related to special tax treatment.

. Two quesions for oday. A. Why do bonds wih he same ime o mauriy have differen YTM s? B. Why do bonds wih differen imes o mauriy have differen YTM s? 2. To answer he firs quesion les look a he risk srucure

### The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas

The Greek financial crisis: growing imbalances and sovereign spreads Heaher D. Gibson, Sephan G. Hall and George S. Tavlas The enry The enry of Greece ino he Eurozone in 2001 produced a dividend in he

### Chapter 7. Response of First-Order RL and RC Circuits

Chaper 7. esponse of Firs-Order L and C Circuis 7.1. The Naural esponse of an L Circui 7.2. The Naural esponse of an C Circui 7.3. The ep esponse of L and C Circuis 7.4. A General oluion for ep and Naural

### Fair games, and the Martingale (or "Random walk") model of stock prices

Economics 236 Spring 2000 Professor Craine Problem Se 2: Fair games, and he Maringale (or "Random walk") model of sock prices Sephen F LeRoy, 989. Efficien Capial Markes and Maringales, J of Economic Lieraure,27,

### PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART TWO

Profi Tes Modelling in Life Assurance Using Spreadshees, par wo PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART TWO Erik Alm Peer Millingon Profi Tes Modelling in Life Assurance Using Spreadshees,

### Vector Autoregressions (VARs): Operational Perspectives

Vecor Auoregressions (VARs): Operaional Perspecives Primary Source: Sock, James H., and Mark W. Wason, Vecor Auoregressions, Journal of Economic Perspecives, Vol. 15 No. 4 (Fall 2001), 101-115. Macroeconomericians

### Relative velocity in one dimension

Connexions module: m13618 1 Relaive velociy in one dimension Sunil Kumar Singh This work is produced by The Connexions Projec and licensed under he Creaive Commons Aribuion License Absrac All quaniies

### BALANCE OF PAYMENTS AND FINANCIAL MA REPORT 2015. All officiell statistik finns på: www.scb.se Statistikservice: tfn 08-506 948 01

RKET BALANCE OF PAYMENTS AND FINANCIAL MA REPORT 2015 All officiell saisik finns på: www.scb.se Saisikservice: fn 08-506 948 01 All official saisics can be found a: www.scb.se Saisics service, phone +46

### Chapter 6: Business Valuation (Income Approach)

Chaper 6: Business Valuaion (Income Approach) Cash flow deerminaion is one of he mos criical elemens o a business valuaion. Everyhing may be secondary. If cash flow is high, hen he value is high; if he

### The yield curve, and spot and forward interest rates Moorad Choudhry

he yield curve, and spo and forward ineres raes Moorad Choudhry In his primer we consider he zero-coupon or spo ineres rae and he forward rae. We also look a he yield curve. Invesors consider a bond yield

### Option Put-Call Parity Relations When the Underlying Security Pays Dividends

Inernaional Journal of Business and conomics, 26, Vol. 5, No. 3, 225-23 Opion Pu-all Pariy Relaions When he Underlying Securiy Pays Dividends Weiyu Guo Deparmen of Finance, Universiy of Nebraska Omaha,

### Part 1: White Noise and Moving Average Models

Chaper 3: Forecasing From Time Series Models Par 1: Whie Noise and Moving Average Models Saionariy In his chaper, we sudy models for saionary ime series. A ime series is saionary if is underlying saisical

### Analysis of tax effects on consolidated household/government debts of a nation in a monetary union under classical dichotomy

MPRA Munich Personal RePEc Archive Analysis of ax effecs on consolidaed household/governmen debs of a naion in a moneary union under classical dichoomy Minseong Kim 8 April 016 Online a hps://mpra.ub.uni-muenchen.de/71016/

### Why Do Real and Nominal. Inventory-Sales Ratios Have Different Trends?

Why Do Real and Nominal Invenory-Sales Raios Have Differen Trends? By Valerie A. Ramey Professor of Economics Deparmen of Economics Universiy of California, San Diego and Research Associae Naional Bureau

### The Price of Gold: A Global Required Yield Theory

The Price of Gold: A Global Required Yield Theory Chrisophe Faugère Assisan Professor of Finance School of Business, Universiy a Albany Albany, NY 2222 (58) 442-4973 and Julian Van Erlach CEO, Nexxus Wealh

### Chapter 5. Interest Rate Term Structure and Arbitrage-Free Valuation

Universié Paris-Dauphine M Gesion menion Finance Fixed Income Markes Marchés de aux d'inérê S. Aboura (Maîre de conférences Chaper 5. Ineres Rae Term Srucure and Arbirage-Free Valuaion Yield curve Spo

### CRISES AND THE FLEXIBLE PRICE MONETARY MODEL. Sarantis Kalyvitis

CRISES AND THE FLEXIBLE PRICE MONETARY MODEL Saranis Kalyviis Currency Crises In fixed exchange rae regimes, counries rarely abandon he regime volunarily. In mos cases, raders (or speculaors) exchange

### FIN 472 Fixed-Income Securities Approximating Price Changes: From Duration to Convexity Professor Robert B.H. Hauswald Kogod School of Business, AU

FIN 47 Fixed-Income Securiies Approximaing rice Changes: From Duraion o Convexiy rofessor Rober B.H. Hauswald Kogod School of Business, AU Bond rice Volailiy Consider only IR as a risk facor Longer M means

### YEN FUTURES: EXAMINING HEDGING EFFECTIVENESS BIAS AND CROSS-CURRENCY HEDGING RESULTS ROBERT T. DAIGLER FLORIDA INTERNATIONAL UNIVERSITY SUBMITTED FOR

YEN FUTURES: EXAMINING HEDGING EFFECTIVENESS BIAS AND CROSS-CURRENCY HEDGING RESULTS ROBERT T. DAIGLER FLORIDA INTERNATIONAL UNIVERSITY SUBMITTED FOR THE FIRST ANNUAL PACIFIC-BASIN FINANCE CONFERENCE The

### Phillips Curve. Macroeconomics Cunningham

Phillips Curve Macroeconomics Cunningham Original Phillips Curve A. W. Phillips (1958), The Relaion Beween Unemploymen and he Rae of Change of Money Wage Raes in he Unied Kingdom, 1861-1957, Economica.

### Hedging with Forwards and Futures

Hedging wih orwards and uures Hedging in mos cases is sraighforward. You plan o buy 10,000 barrels of oil in six monhs and you wish o eliminae he price risk. If you ake he buy-side of a forward/fuures

### Chapter 1.6 Financial Management

Chaper 1.6 Financial Managemen Par I: Objecive ype quesions and answers 1. Simple pay back period is equal o: a) Raio of Firs cos/ne yearly savings b) Raio of Annual gross cash flow/capial cos n c) = (1

### Morningstar Investor Return

Morningsar Invesor Reurn Morningsar Mehodology Paper Augus 31, 2010 2010 Morningsar, Inc. All righs reserved. The informaion in his documen is he propery of Morningsar, Inc. Reproducion or ranscripion

### FORWARD AND FUTURES CONTRACTS

Page1 C H A P T E R 2 FORWARD AND FUTURES CONTRACTS 2.1 INTRODUCTION The main purpose of forward and fuures conracs is he managemen of risk. The exposure o risk as a resul of ransacing in he spo marke

### Relationships between Stock Prices and Accounting Information: A Review of the Residual Income and Ohlson Models. Scott Pirie* and Malcolm Smith**

Relaionships beween Sock Prices and Accouning Informaion: A Review of he Residual Income and Ohlson Models Sco Pirie* and Malcolm Smih** * Inernaional Graduae School of Managemen, Universiy of Souh Ausralia

### The Grantor Retained Annuity Trust (GRAT)

WEALTH ADVISORY Esae Planning Sraegies for closely-held, family businesses The Granor Reained Annuiy Trus (GRAT) An efficien wealh ransfer sraegy, paricularly in a low ineres rae environmen Family business

### Duration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is \$613.

Graduae School of Business Adminisraion Universiy of Virginia UVA-F-38 Duraion and Convexiy he price of a bond is a funcion of he promised paymens and he marke required rae of reurn. Since he promised

### Investor sentiment of lottery stock evidence from the Taiwan stock market

Invesmen Managemen and Financial Innovaions Volume 9 Issue 1 Yu-Min Wang (Taiwan) Chun-An Li (Taiwan) Chia-Fei Lin (Taiwan) Invesor senimen of loery sock evidence from he Taiwan sock marke Absrac This

### Depreciation and Corporate Taxes

205 Depreciaion and Corporae Taxes Chris Hendrickson Carnegie Mellon Universiy Tung Au Carnegie Mellon Universiy 205.1 Depreciaion as Tax Deducion 205.2 Tax Laws and Tax Planning 205.3 Decision Crieria

### Glenn P. Jenkins Queen s University, Kingston, Canada and Eastern Mediterranean University, North Cyprus

COST-BENEFIT ANALYSIS FOR INVESTMENT DECISIONS, CHAPTER 3: THE FINANCIAL APPRAISAL OF PROJECTS Glenn P. Jenkins Queen s Universiy, Kingson, Canada and Easern Medierranean Universiy, Norh Cyprus Developmen

### Can Individual Investors Use Technical Trading Rules to Beat the Asian Markets?

Can Individual Invesors Use Technical Trading Rules o Bea he Asian Markes? INTRODUCTION In radiional ess of he weak-form of he Efficien Markes Hypohesis, price reurn differences are found o be insufficien

### What is the natural interest rate?

Wha is he naural ineres rae? Henrik Lundvall and Andreas Wesermark The auhors work a he Moneary Policy Deparmen, Sveriges Riksbank. Wha real ineres rae should a cenral bank aim for if i wishes o aain a

### Explaining the NZ-Australian exchange rate occasional paper

Wespac \$ Insiuional Bank April 2002 Explaining he NZ-Ausralian exchange rae occasional paper Paul Conway and Richard Franulovich Wespac Insiuional Bank PO Box 691 Wellingon New Zealand Phone (644) 381-1414

### INSTITUTE OF ECONOMIC STUDIES

INIU O CONOMIC UDI aculy of social sciences of Charles Universiy uures Conracs Lecurer s Noes No. Course: inancial Marke Insrumens I eacher: Oldřich Dědek I. BAIC AUR O ORWARD AND UUR CONRAC. Classificaion

### Table of contents Chapter 1 Interest rates and factors Chapter 2 Level annuities Chapter 3 Varying annuities

Table of conens Chaper 1 Ineres raes and facors 1 1.1 Ineres 2 1.2 Simple ineres 4 1.3 Compound ineres 6 1.4 Accumulaed value 10 1.5 Presen value 11 1.6 Rae of discoun 13 1.7 Consan force of ineres 17

### Chapter 9 Bond Prices and Yield

Chaper 9 Bond Prices and Yield Deb Classes: Paymen ype A securiy obligaing issuer o pay ineress and principal o he holder on specified daes, Coupon rae or ineres rae, e.g. 4%, 5 3/4%, ec. Face, par value

### Cannibalization and Product Life Cycle Management

Middle-Eas Journal of Scienific Research 19 (8): 1080-1084, 2014 ISSN 1990-9233 IDOSI Publicaions, 2014 DOI: 10.5829/idosi.mejsr.2014.19.8.11868 Cannibalizaion and Produc Life Cycle Managemen Ali Farrukh

### I. Basic Concepts (Ch. 1-4)

(Ch. 1-4) A. Real vs. Financial Asses (Ch 1.2) Real asses (buildings, machinery, ec.) appear on he asse side of he balance shee. Financial asses (bonds, socks) appear on boh sides of he balance shee. Creaing

### THE SUPPLY OF STOCK MARKET RETURNS. Roger G. Ibbotson Yale University. Peng Chen Ibbotson Associates, Inc.

THE SUPPLY OF STOCK MARKET RETURNS Roger G. Ibboson Yale Universiy Peng Chen Ibboson Associaes, Inc. June 2001 The Supply of Sock Marke Reurns Roger G. Ibboson, Ph.D. Professor in he Pracice of Finance

### The Real Business Cycle paradigm. The RBC model emphasizes supply (technology) disturbances as the main source of

Prof. Harris Dellas Advanced Macroeconomics Winer 2001/01 The Real Business Cycle paradigm The RBC model emphasizes supply (echnology) disurbances as he main source of macroeconomic flucuaions in a world

### TREASURY BILL VERSUS PRIVATE MONEY MARKET YIELD CURVES

TREASURY BILL VERSUS PRIVATE MONEY MARKET YIELD CURVES Timohy D. Rowe, Thomas A. Lawler* and Timohy Q. Cook The relaionship beween ime o mauriy and yield on securiies is of widespread ineres o financial

### II.1. Debt reduction and fiscal multipliers. dbt da dpbal da dg. bal

Quarerly Repor on he Euro Area 3/202 II.. Deb reducion and fiscal mulipliers The deerioraion of public finances in he firs years of he crisis has led mos Member Saes o adop sizeable consolidaion packages.

### THE IMPACT OF CUBES ON THE MARKET QUALITY OF NASDAQ 100 INDEX FUTURES

Invesmen Managemen and Financial Innovaions, Volume 3, Issue 3, 2006 117 THE IMPACT OF CUBES ON THE MARKET QUALITY OF NASDAQ 100 INDEX FUTURES Seyfein Unal, M. Mesu Kayali, Cuney Koyuncu Absrac Using Hasbrouck

### A Re-examination of the Joint Mortality Functions

Norh merican cuarial Journal Volume 6, Number 1, p.166-170 (2002) Re-eaminaion of he Join Morali Funcions bsrac. Heekung Youn, rkad Shemakin, Edwin Herman Universi of S. Thomas, Sain Paul, MN, US Morali

### Terms of Trade and Present Value Tests of Intertemporal Current Account Models: Evidence from the United Kingdom and Canada

Terms of Trade and Presen Value Tess of Ineremporal Curren Accoun Models: Evidence from he Unied Kingdom and Canada Timohy H. Goodger Universiy of Norh Carolina a Chapel Hill November 200 Absrac This paper

### Benefit-Cost Analysis

Slide 1 Benefi-Cos Analysis Sco Pearson Sanford Universiy Sco Pearson is Professor Emerius of Agriculural Economics a he Food Research Insiue, Sanford Universiy. He has paricipaed in projecs ha combined

### International Risk Sharing: Through Equity Diversification or Exchange Rate Hedging?

WP/09/38 Inernaional Risk Sharing: Through Equiy Diversificaion or Exchange Rae Hedging? Charles Engel and Akio Masumoo 2009 Inernaional Moneary Fund WP/09/38 IMF Working Paper Research Deparmen Inernaional

### Cointegration Analysis of Exchange Rate in Foreign Exchange Market

Coinegraion Analysis of Exchange Rae in Foreign Exchange Marke Wang Jian, Wang Shu-li School of Economics, Wuhan Universiy of Technology, P.R.China, 430074 Absrac: This paper educed ha he series of exchange

### Risk Modelling of Collateralised Lending

Risk Modelling of Collaeralised Lending Dae: 4-11-2008 Number: 8/18 Inroducion This noe explains how i is possible o handle collaeralised lending wihin Risk Conroller. The approach draws on he faciliies

### Working Paper Capital Mobility, Consumption Substitutability, and the Effectiveness of Monetary Policy in Open Economies

econsor www.econsor.eu Der Open-Access-Publikaionsserver der ZBW Leibniz-Informaionszenrum Wirschaf The Open Access Publicaion Server of he ZBW Leibniz Informaion Cenre for Economics Pierdzioch, Chrisian

### Exchange Rates, Equity Prices, and Capital Flows

Exchange Raes, Equiy Prices, and Capial Flows Harald Hau Deparmen of Finance, INSEAD Hélène Rey Deparmen of Economics and Woodrow Wilson School, Princeon Universiy We develop an equilibrium model in which

### DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR

Invesmen Managemen and Financial Innovaions, Volume 4, Issue 3, 7 33 DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR Ahanasios

### cooking trajectory boiling water B (t) microwave 0 2 4 6 8 101214161820 time t (mins)

Alligaor egg wih calculus We have a large alligaor egg jus ou of he fridge (1 ) which we need o hea o 9. Now here are wo accepable mehods for heaing alligaor eggs, one is o immerse hem in boiling waer

### Market Liquidity and the Impacts of the Computerized Trading System: Evidence from the Stock Exchange of Thailand

36 Invesmen Managemen and Financial Innovaions, 4/4 Marke Liquidiy and he Impacs of he Compuerized Trading Sysem: Evidence from he Sock Exchange of Thailand Sorasar Sukcharoensin 1, Pariyada Srisopisawa,

### Topic Overview. Learning Objectives. Capital Budgeting Steps: WHAT IS CAPITAL BUDGETING?

Chaper 10: THE BASICS OF CAPITAL BUDGETING Should we build his plan? Topic Overview Projec Types Capial Budgeing Decision Crieria Payback Period Discouned Payback Period Ne Presen Value () Inernal Rae

### Measuring the Effects of Exchange Rate Changes on Investment. in Australian Manufacturing Industry

Measuring he Effecs of Exchange Rae Changes on Invesmen in Ausralian Manufacuring Indusry Robyn Swif Economics and Business Saisics Deparmen of Accouning, Finance and Economics Griffih Universiy Nahan

### SKF Documented Solutions

SKF Documened Soluions Real world savings and we can prove i! How much can SKF save you? Le s do he numbers. The SKF Documened Soluions Program SKF is probably no he firs of your supplier parners o alk

### Economics 140A Hypothesis Testing in Regression Models

Economics 140A Hypohesis Tesing in Regression Models While i is algebraically simple o work wih a populaion model wih a single varying regressor, mos populaion models have muliple varying regressors 1

### Present Value Methodology

Presen Value Mehodology Econ 422 Invesmen, Capial & Finance Universiy of Washingon Eric Zivo Las updaed: April 11, 2010 Presen Value Concep Wealh in Fisher Model: W = Y 0 + Y 1 /(1+r) The consumer/producer

### Chapter 7: Estimating the Variance of an Estimate s Probability Distribution

Chaper 7: Esimaing he Variance of an Esimae s Probabiliy Disribuion Chaper 7 Ouline Review o Clin s Assignmen o General Properies of he Ordinary Leas Squares (OLS) Esimaion Procedure o Imporance of he

### Optimal Investment and Consumption Decision of Family with Life Insurance

Opimal Invesmen and Consumpion Decision of Family wih Life Insurance Minsuk Kwak 1 2 Yong Hyun Shin 3 U Jin Choi 4 6h World Congress of he Bachelier Finance Sociey Torono, Canada June 25, 2010 1 Speaker

### A Further Examination of Insurance Pricing and Underwriting Cycles

A Furher Examinaion of Insurance ricing and Underwriing Cycles AFIR Conference, Sepember 2005, Zurich, Swizerland Chris K. Madsen, GE Insurance Soluions, Copenhagen, Denmark Svend Haasrup, GE Insurance

### Capital Flows and Current Account Sustainability: The Ghanaian Experience

CREDIT Research Paper No. 07/07 Capial Flows and Curren Accoun Susainabiliy: The Ghanaian Experience by Absrac Maxwell Opoku-Afari Boh heoreical and operaional definiions of curren accoun susainabiliy

### Title: Who Influences Latin American Stock Market Returns? China versus USA

Cenre for Global Finance Working Paper Series (ISSN 2041-1596) Paper Number: 05/10 Tile: Who Influences Lain American Sock Marke Reurns? China versus USA Auhor(s): J.G. Garza-García; M.E. Vera-Juárez Cenre

### Newton's second law in action

Newon's second law in acion In many cases, he naure of he force acing on a body is known I migh depend on ime, posiion, velociy, or some combinaion of hese, bu is dependence is known from experimen In

### The Impact of International Oil Price Fluctuation on China s Economy

Available online a www.sciencedirec.com Energ Procedia 5 (2011) 1360 1364 IACEED2010 The Impac of Inernaional Oil Price Flucuaion on China s Econom Zhang Qianqian School of Economics and Managemen, Wuhan

### INSTRUMENTS OF MONETARY POLICY*

Aricles INSTRUMENTS OF MONETARY POLICY* Bernardino Adão** Isabel Correia** Pedro Teles**. INTRODUCTION A classic quesion in moneary economics is wheher he ineres rae or he money supply is he beer insrumen

### SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES

Inernaional Journal of Accouning Research Vol., No. 7, 4 SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES Mohammad Ebrahimi Erdi, Dr. Azim Aslani,

San Francisco Sae Universiy Naional Income and Produc Accouns (NIPA) 1 Michael Bar Our firs oal is o come up wih a noion of he economy s oupu or producive capaciy of he economy. The U.S. produces a variey

### RETHINKING FORWARD AND SPOT EXCHANGE RATES IN INTERNATIONSAL TRADING

REHINKING ORWARD AND PO EXCHANGE RAE IN INERNAIONAL RADING Guan Jun Wang, avannah ae Universiy ABRAC his sudy uses alernaive esing mehods o re-examines he relaion beween he forward exchange rae and corresponding

### Portfolio Choice and Home Bias in Equities in a Monetary Open- Economy DSGE Model

Porfolio Choice and Home Bias in Equiies in a Moneary Open- Economy DSGE Model Charles Engel Universiy of isconsin and NBE Akio Masumoo Inernaional Moneary Fund May 6 2005 (Firs version Sepember 23 2004)

### New facts in finance. John H. Cochrane

New facs in finance John H. Cochrane Inroducion and summary The las 15 years have seen a revoluion in he way financial economiss undersand he invesmen world. We once hough ha sock and bond reurns were

### Are European Corporate Bond and Default Swap Markets Segmented?

Are European Corporae Bond and Defaul Swap Markes Segmened? Didier COSSIN IMD Inernaional Hongze LU IMD Inernaional HEC Universiy of Lausanne Research Paper N 33 March 005 FAME - Inernaional Cen er for

### Bid-ask Spread and Order Size in the Foreign Exchange Market: An Empirical Investigation

Bid-ask Spread and Order Size in he Foreign Exchange Marke: An Empirical Invesigaion Liang Ding* Deparmen of Economics, Macaleser College, 1600 Grand Avenue, S. Paul, MN55105, U.S.A. Shor Tile: Bid-ask

### The naive method discussed in Lecture 1 uses the most recent observations to forecast future values. That is, Y ˆ t + 1

Business Condiions & Forecasing Exponenial Smoohing LECTURE 2 MOVING AVERAGES AND EXPONENTIAL SMOOTHING OVERVIEW This lecure inroduces ime-series smoohing forecasing mehods. Various models are discussed,

### Exchange Rates, Equity Prices and Capital Flows

Exchange Raes, Equiy Prices and Capial Flows Forhcoming in he Review of Financial Sudies Harald Hau INSEAD and CEPR Hélène Rey Princeon Universiy, CEPR and NBER Ocober 2004 Absrac We develop an equilibrium

### PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE

Profi Tes Modelling in Life Assurance Using Spreadshees PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Erik Alm Peer Millingon 2004 Profi Tes Modelling in Life Assurance Using Spreadshees

### Stochastic Optimal Control Problem for Life Insurance

Sochasic Opimal Conrol Problem for Life Insurance s. Basukh 1, D. Nyamsuren 2 1 Deparmen of Economics and Economerics, Insiue of Finance and Economics, Ulaanbaaar, Mongolia 2 School of Mahemaics, Mongolian

### Share prices and the value of workers

Share prices and he value of workers By Eran Yashiv, Bank of England Houblon-Norman Fellow. (1) Is he value of workers in a company refleced in is share price? Tradiional approaches sugges no. This aricle

### Predicting Stock Market Index Trading Signals Using Neural Networks

Predicing Sock Marke Index Trading Using Neural Neworks C. D. Tilakarane, S. A. Morris, M. A. Mammadov, C. P. Hurs Cenre for Informaics and Applied Opimizaion School of Informaion Technology and Mahemaical

### A Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation

A Noe on Using he Svensson procedure o esimae he risk free rae in corporae valuaion By Sven Arnold, Alexander Lahmann and Bernhard Schwezler Ocober 2011 1. The risk free ineres rae in corporae valuaion

### CVA calculation for CDS on super senior ABS CDO

MPRA Munich Personal RePEc Archive CVA calculaion for CDS on super senior AS CDO Hui Li Augus 28 Online a hp://mpra.ub.uni-muenchen.de/17945/ MPRA Paper No. 17945, posed 19. Ocober 29 13:33 UC CVA calculaion

### Capital budgeting techniques

Capial budgeing echniques A reading prepared by Pamela Peerson Drake O U T L I N E 1. Inroducion 2. Evaluaion echniques 3. Comparing echniques 4. Capial budgeing in pracice 5. Summary 1. Inroducion The

### CHARGE AND DISCHARGE OF A CAPACITOR

REFERENCES RC Circuis: Elecrical Insrumens: Mos Inroducory Physics exs (e.g. A. Halliday and Resnick, Physics ; M. Sernheim and J. Kane, General Physics.) This Laboraory Manual: Commonly Used Insrumens:

### State Machines: Brief Introduction to Sequencers Prof. Andrew J. Mason, Michigan State University

Inroducion ae Machines: Brief Inroducion o equencers Prof. Andrew J. Mason, Michigan ae Universiy A sae machine models behavior defined by a finie number of saes (unique configuraions), ransiions beween

### Graduate Macro Theory II: Notes on Neoclassical Growth Model

Graduae Macro Theory II: Noes on Neoclassical Growh Model Eric Sims Universiy of Nore Dame Spring 2011 1 Basic Neoclassical Growh Model The economy is populaed by a large number of infiniely lived agens.

### Efficiency of the Mutual Fund Industry: an Examination of U.S. Domestic Equity Funds: 1995-2004

Geysburg Economic Review Volume 1 Aricle 4 2006 Efficiency of he Muual Fund Indusry: an Examinaion of U.S. Domesic Equiy Funds: 1995-2004 Chase J. Sewar Geysburg College Class of 2006 Follow his and addiional

### Double Entry System of Accounting

CHAPTER 2 Double Enry Sysem of Accouning Sysem of Accouning \ The following are he main sysem of accouning for recording he business ransacions: (a) Cash Sysem of Accouning. (b) Mercanile or Accrual Sysem

### SPEC model selection algorithm for ARCH models: an options pricing evaluation framework

Applied Financial Economics Leers, 2008, 4, 419 423 SEC model selecion algorihm for ARCH models: an opions pricing evaluaion framework Savros Degiannakis a, * and Evdokia Xekalaki a,b a Deparmen of Saisics,