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International Finance Course - Chapter 4 Note

 


Term

Explanation

Law of one price

一价定律

The Law of one price refer that if in the free trade market that without the affect from transport cost and external barriers, the same type of the goods should have the same price if counting by the same currency even sold in different countries. So that even the currency is different, the value price of the goods should remain the same.

 

一价定律是指在自由贸易市场中,如果不受运输成本和外部壁垒的影响,同种商品即使在不同国家销售,以同一种货币计算也应该具有相同的价格。 这样即使货币不同,货物的价值价格也应该保持不变。

Purchasing power parity

购买力平价

It was Equivalence coefficient amount that count based on different countries price level to make a more reasonable comparison of GDP between country. This is because the depreciation of a country does not mean that the people of that country is poor.

是根据不同国家的物价水平计算等值系数,以便更合理地比较国家间的GDP。这是因为一个国家贬值并不意味着该国人民贫穷。

 

Absolute Purchasing power parity

It refers that the true value of one currency is based on the purchasing power of the currency. It also has a premise which is having the similar basket of goods or equal weights.

它是指一种货币的真实价值取决于该货币的购买力。 它还有一个前提,即具有相似的一篮子商品或相等的重量。

 

Relative purchasing power parity

Emphasize that difference of exchange rate will similar or equal to the inflation rate between spot and forward rate. In other term, the hedge between the exchange rate and spot forward exchange rate.

强调即期汇率和远期汇率之间的汇率差异应接近或等于通货膨胀率。 换而言之,汇率与即期远期汇率之间的对冲。

Type of exchange rate

Nominal exchange rate

Exchange rate that shows by the bank or agency

 

Real exchange rate

It shows the comparison domestic product price and foreign product price to reflect the true competitiveness and purchasing power of the country.

Forward primum exchange rate

 

Formula:

(((spot-forward/forward) *(360/days)) *100

Covered Interest Arbitrage

无风险套利

Explanation:

The arbitragers are who recognize the disequilibrium between spot and forward in the exchange market and earn the gap profit between them with no risk.

套利者是认识到外汇市场现货和远期的不平衡,并在没有风险的情况下赚取两者之间的差距利润。

 

Example:

If the same stock sell at 100yen in stock exchange market A and 80yen in stock exchange market B. Then arbitragers would release all his stock at stock exchange market A and buy from stock exchange market B and sell back at stock exchange market A to earn 20yen gap profit.

如果同一只股票在 A 股市场卖出 100 日元,在 B 股市场卖出 80 日元,那么套利者会在 A 股市场释放所有股票,然后从 B 股市场买入,然后在 A 股市场卖回,赚取 20 日元 缺口利润。

 

 



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