Lecture-1Lecture-1：FOREIGN-EXCHANGE-MARKET(国际金融-南开-胡春田).doc

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1、Lecture1：FOREIGNEXCHANGEMARKETDefinition:F.E:①bankdepositintermsofforeigncurrency②foreigncurrency:bill,coin③shorttermsclaimsonforeignassets:treasurybill,stock,foreignbondF.E.MARKT：placewhichservesasintermediaryofsellingandbuyingF.E.NosingleplacePARTICIPANTS：①retailcustomer②commercialbanks③F.E.

2、brokers④centralbanksEXCHANGERATE:Bilateralvsweightedaverage(effectiveexchangerate)Nominalvs.realBuyingvssellingrate(bid)(offer)(ask)spreadbid---offernotransactioncostèRMB/￡==1/（￡/RMB）iftransactioncostexistè(RMB/＄)bid==1/(＄/RMB)offer(RMB/＄)offer==1/(＄/RMB)bidDeterminationofERregime①flexibleorcl

3、eanfloating(pure)②fixed(vspegged)③managedfloating(dirty)④crawlingpeg⑤targetzoneHowtomaintainfixedERsystem:legalrestrictionondealingtransactionofFEviathecentralbankprivatehedgeofFEbebannedpreservingfinedsystemandconvertibilityèinterventionFixedsustainable?BlackmarketBOPcrisis,speculativeattacks

4、12Spotvsforwardmkts↓↓immediatedeliveryfuturedeliverybutpriceisdeterminedtodayWhyusingforward：hedging(avoidrisk)Coexistenceofforwardmkt&spotmktèarbitraging(ifnocapitalcontrol)Arbitrage：1+i＜(1+i*)Fècapitaloutflow1+i*＜(1+i)Sècapitalinflowè1+i=(1+i*)Fèèècoveredinterestparity（CIP）iscalledforwardpre

5、mium（discount）ifgreater（smaller）thanzero。test①(F-S)/S(F-S)/Scoveredinterestparityneutralbandi-i*②econometricstesting：specification:(F-S)/S=α+β(i-i*);ori=α+β[i*+(F-S)/S];ori-i*=α+β(F-S)/SNullhypothesis:α=0,β=1FRENKEL/LEVICHMODEL（test1）12Typesoftransactioncostinvolvingincapitaloutflow:①sellingof

6、domesticsecurityt②buyingspotts③buyingforeignsecurityt*④sellingforwardtfReviewofcapitaloutflowprocess：REVENUE：R=x(1-t)(1-ts)(1-t*)(1-tf)(1+i*)F/S≡xΩ(1+i*)F/SCOST：C=x(1+i)WherexisthevalueoffundindomesticcurrencyMovingcapitaloutifandonlyifR>C,orΩ(1+i*)F/S>(1+i),orDefinepIfp<ènocapitaloutflowRevie

7、wofcapitalinflowprocess：COSTinvolvingincapitalinflow①sellingforeignsecurityt*②sellingspotts②buyingdomesticsecurityt④buyingforwardtfCOST：C=(1+i*)REVENUE：R=IfR>Cècapitalinflow>(1+i*)è12IfèNOcapitalinflowbecause(,)istheneutralbandEstimateΩ