国际金融期末复习资料

1. Arbitrage

Definition: The purchase and sale of something in another market to take advantage of price differentials for the purpose of making guaranteed profit.

OR

The purchase of something in one market for immediate resale in another to profit from a price discrepancy. (2’)

Example: Free answer (3’)

2. Derivative

Definition: Derivative is an investment whose value today or at some future date is derived entirely from the value of other assets known as the underlying assets or initiative financial asse ts. (2’)

Example: Free answer (3’)

3. PPP Theory

Definition: The PPP (purchasing power parity) theory states that given relatively efficient markets, the price of a “basket of goods” should be roughly equivalent in each country, because of the Law of One Price. (Therefore, the exchange rate between two countries should equal the ratio of the two countries’ price levels.) (2’)

Example: Free answer (3’)

4. Option

Definition: Option is a contract giving the buyer the right, but not the obligation, to buy or sell a specific amount of currency or other assets at a specific exchange rate on or before a specified future date. (2’) Example: Free answer (3’)

5. Pegged exchange rate

Definition: A pegged exchange rate means the value of the currency is fixed relative to a reference currency, such as the US dollar, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate. (2’)

Example: Free answer (3’)

6. Currency crisis

Definition: A currency crisis occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency, or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates in order to defend prevailing exchange rates. (2’)

Example: Free answer (3’)

(5%)

1. Speculation

Definition: It involves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates or assets’prices. It can be bullish and bearish. (2’)

Example: Free answer (3’)

2. Hedge

Definition: Hedge is an approach designed to reduce or offset a possible risk, i.e., cover the risk. (2’)

Example: Free answer (3’)

3. International Fisher Effect

Definition: “Fisher-open” st ates that for any two countries, the future spot rate should move in an amount equal to, but in the opposite direction from, the difference in nominal interest rates between two countries. A future spot rate of a currency with a lower interest rate would appreciate in the long run. (2’)

Example: Free answer (3’)

4. Future contract

Definition: A future contract is a standardized forward contract between two parties where one of the parties commits to sell and the other to buy a stipulated quantity of a security or an index at an agreed price on or before a given date in the future. (2’)

Example: Free answer (3’)

5. Bretton Woods System

Definition: Under the Bretton Woods system, the U.S. dollar was pegged to gold at $35 per ounce and other currencies were pegged to the U.S. dollar. (2’)