|
|
|
|
|
|
Welcome to the Australian Ford Forums forum. You are currently viewing our boards as a guest which gives you limited access to view most discussions and inserts advertising. By joining our free community you will have access to post topics, communicate privately with other members, respond to polls, upload content and access many other special features without post based advertising banners. Registration is simple and absolutely free so please, join our community today! If you have any problems with the registration process or your account login, please contact us. Please Note: All new registrations go through a manual approval queue to keep spammers out. This is checked twice each day so there will be a delay before your registration is activated. |
|
|||||||
| The Bar For non Automotive Related Chat |
 |
|
|
Thread Tools | Display Modes |
08-05-2007, 11:15 AM
|
#1 | ||
|
Spr Jenkins
Join Date: Mar 2006
Location: Melbourne
Posts: 597
|
Is there any uni students doing financial management that understand Covered, uncovered and real interest parity, purchasing power parity and deviations from all of the above? I have a case study due and could really use some help from someone in Melbourne. Would make it worth your time. Thanks Joel
__________________
-Before Chuck Norris visited them, they were called "The Virgin Islands" Now, they're just "The Islands" -Mathematicians have found that due to the excessive amount of women Chuck Norris has slept with, it is guaranteed that he appears in your family tree a minimum of three times -Chuck Norris doesn't sleep. He waits. -Chuck Norris once worked as a weatherman for the San Diego evening news. Every night he would make the same forecast: Partly Cloudy with a 75% chance of Pain. |
||
|
|
|
08-05-2007, 01:05 PM
|
#2 | ||
|
Official AFF conservative
Join Date: Dec 2004
Location: Adelaide, SA
Posts: 3,549
|
Lol, been a while since i did my finance degree... so i certainly cant go into the level of detail you're seeking.
All the terms listed are theories which discuss the relationship between the exchange rate between two currencies (if one currency is not USD then technically its a cross rate, not an exchange rate.... but anyways) and the difference between their domestic interest rates. CIP looks at the relationship between spot and forward contract markets. Basically it leads one to the conclusion that the interest rate differential between two domestic markets can be determined by the difference between the spot and forward exchange rates. That is to say, the laws of arbitrage would see that: - borrowing in AUD - converting @ spot rate to USD and taking a forward rate to bring USD back to AUD in 12 months time - investing those USD for 12 months, then redeeming the investment and excercising your forward USD/AUD contract Would net you the same result as investing those AUD domestically for 12 months (of course this ignores transaction costs). That is, the difference in spot and forward rates will reflect the interest rate differential. UIP is very very similar but does not consider the forward exchange rates - it looks at investing in 2 (or more) different domestic markets at spot rates. - Borrow AUD - Convert to USD (@ spot) - Invest USD for 12 months - Convert back to AUD after 12 months (@ spot) Would net you the same result as borrowing AUD and investing in australia for 12 months. PPP just looks at what goods you can buy with given amount of two different currencies. If you remember efficient market hypothesis, the same good can only have the one value... the law of one price. Basic example is usually a cheeseburger. Let's assume $1AUD = $0.50USD or $1USD = $2AUD. PPP will tell you that a cheeseburger that costs $3AUD in australia... will cost $1.50USD in America (or, to reverse that out... it will tell you that if a USA cheeseburger costs $1.50USD and an aussie cheeseburger costs $3.00AUD... then the exchange rate must be AUD/USD = $0.50) Lol, deviations... you're on your own. But the common flaw to all the theories is that they make a lot of assumptions. - Markets are efficient (i.e. they adhere to the efficient market hypothesis) - No transaction costs - Risk averse investors (i.e. they assume that no one is behaving in a speculative manner) Lol, asleep yet?
__________________
A cup half empty... but full of euphoria. |
||
|
|
|
|
08-05-2007, 01:22 PM
|
#3 | ||
|
FF.Com.Au Hardcore
Join Date: Aug 2005
Location: Barossa Valley, South Australia
Posts: 3,381
|
 sleep:
__________________
Cheers, Sam. |
||
|
|
|
|
08-05-2007, 02:57 PM
|
#4 | |||
|
Official AFF conservative
Join Date: Dec 2004
Location: Adelaide, SA
Posts: 3,549
|
Quote:
__________________
A cup half empty... but full of euphoria. |
|||
|
|
|
|
08-05-2007, 05:07 PM
|
#5 | ||
|
Spr Jenkins
Join Date: Mar 2006
Location: Melbourne
Posts: 597
|
lol, i think i've got it now. i have a set of figures and have to calculate deviations from cip, uip, ppp and rip. Which is to say that they don't equal zero, which they should if the theories hold. What I couldn't work out is if I could just use the covered margin or not. Then I have to graph the lot and prove that RIP = UIP + PPP, or RIP = CIP + FWD rate bias + PPP
__________________
-Before Chuck Norris visited them, they were called "The Virgin Islands" Now, they're just "The Islands" -Mathematicians have found that due to the excessive amount of women Chuck Norris has slept with, it is guaranteed that he appears in your family tree a minimum of three times -Chuck Norris doesn't sleep. He waits. -Chuck Norris once worked as a weatherman for the San Diego evening news. Every night he would make the same forecast: Partly Cloudy with a 75% chance of Pain. |
||
|
|
|
|
08-05-2007, 06:18 PM
|
#6 | ||
|
Official AFF conservative
Join Date: Dec 2004
Location: Adelaide, SA
Posts: 3,549
|
Lol, not sure what to tell you mate.
It would be an interesting excercise to calc longhand then calculate the same using the covered margin... see if the result is any different? Sorry cant offer much more help... one tends to forget a lot of this stuff upon entering the workforce 
__________________
A cup half empty... but full of euphoria. |
||
|
|
|
Uni Students Doing International Financial MGT (CIP, UIP, PPP)
Linear Mode
