公司理财Chap020

InternationalCorporateFinanceChapter20Copyright©2011byTheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/Irwin20-1InterpretexchangeratequotesanddescribetheirmeaningDifferentiatebetweenspotandforwardratesSpecifythedistinctionbetweenpurchasingpowerparityandinterestrateparity,andtheimplicationsforchangesinexchangeratesArticulatethebasicsofinternationalcapitalbudgetingDescribetheimpactofpoliticalriskoninternationalbusinessinvesting20-220.1Terminology20.2ForeignExchangeMarketsandExchangeRates20.3PurchasingPowerParity20.4InterestRateParity,UnbiasedForwardRates,andtheInternationalFisherEffect20.5InternationalCapitalBudgeting20.6ExchangeRateRisk20.7PoliticalRisk20-3AmericanDepositoryReceipt(ADR):asecurityissuedintheU.S.torepresentsharesofaforeignstockCrossrate:theexchangeratebetweentwoforeigncurrencies,e.g.,theexchangeratebetween£and¥Euro(€):thesinglecurrencyoftheEuropeanMonetaryUnionwhichwasadoptedbyMemberStateson1January1999.Eurobonds:bondsdenominatedinaparticularcurrency(usuallytheissuer’shomecurrency)andissuedsimultaneouslyinthebondmarketsofseveralcountries20-4Eurocurrency:moneydepositedinafinancialcenteroutsidethehomecountry.EurodollarsaredollardepositsheldoutsidetheU.S.;EuroyenareyendenominateddepositsheldoutsideJapan.Foreignbonds:bondsissuedinanothernation’scapitalmarketbyaforeignborrowerGilts:BritishandIrishgovernmentsecuritiesLIBOR:theLondonInterbankOfferRateistheratemostinternationalbankschargeoneanotherforloansofEurodollarsovernightintheLondonmarket20-5Withoutadoubt,theforeignexchangemarketistheworld’slargestfinancialmarket.Inthismarket,onecountry’scurrencyistradedforanother’s.Mostofthetradingtakesplaceinafewcurrencies:◦U.S.dollar($)◦Britishpoundsterling(£)◦Japaneseyen(¥)◦Euro(€)20-6TheFOREXmarketisatwo-tieredmarket:◦InterbankMarket(Wholesale)About700banksworldwidestandreadytomakeamarketinForeignexchange.Nonbankdealersaccountforabout20%ofthemarket.ThereareFXbrokerswhomatchbuyandsellordersbutdonotcarryinventoryandFXspecialists.◦ClientMarket(Retail)Marketparticipantsincludeinternationalbanks,theircustomers,nonbankdealers,FOREXbrokers,andcentralbanks.20-7Thepriceofonecountry’scurrencyintermsofanother.Mostcurrencyisquotedintermsofdollars.Considerthefollowingquote:◦Euro1.29167.77419◦Thefirstnumber(1.29167)ishowmanyU.S.dollarsittakestobuy1Euro◦Thesecondnumber(.77419)ishowmanyEurosittakestobuy$1◦Thetwonumbersarereciprocalsofeachother(1/1.1.29167=.77419)20-8Supposeyouhave$10,000.BasedontheratesinFigure20.1,howmanySwissFrancscanyoubuy?◦Exchangerate=1.1181Francsperdollar◦Buy10,000(1.0441)=10,441FrancsSupposeyouarevisitingBombayandyouwanttobuyasouvenirthatcosts1,000IndianRupees.HowmuchdoesitcostinU.S.dollars?◦Exchangerate=45.851rupeesperdollar◦Cost=1,000/45.851=$21.8120-9SupposethatSDM(0)=.50◦i.e.,$1=2DMinthespotmarketandthatS¥(0)=100◦i.e.,$1=¥100WhatmusttheDM/¥crossratebe?,$¥$¥sinceDMDM?0DM1or.02)0(?011$2?001$¥¥/DMSDMDMDM20-10$£¥CreditLyonnaisS£(0)=1.50CreditAgricoleS¥/£(0)=85BarclaysS¥(0)=120Supposeweobservethesebankspostingtheseexchangerates.Firstcalculatetheimpliedcrossratestoseeifanarbitrageexists.20-11$£¥CreditLyonnaisS£(0)=1.50CreditAgricoleS¥/£(0)=85BarclaysS¥(0)=120TheimpliedS(¥/£)crossrateisS(¥/£)=80CreditAgricolehaspostedaquoteofS(¥/£)=85,sothereisanarbitrageopportunity.So,howcanwemakemoney?£1.50$1×$1¥120=£1¥8020-12$£¥CreditLyonnaisS£(0)=1.50CreditAgricoleS¥/£(0)=85BarclaysS¥(0)=120Aseasyas1–2–3:1.Sellour$for£,2.Sellour£for¥,3.Sellthose¥for$.20-13Sell$100,000for£atS£(0)=1.50receive£150,000Sellour£150,000for¥atS¥/£(0)=85receive¥12,750,000Sell¥12,750,000for$atS¥(0)=120receive$106,250profitperroundtrip=$106,250–$100,000=$6,25020-14Spottrade–exchangecurrencyimmediately◦Spotrate–theexchangerateforanimmediatetradeForwardtrade–agreetodaytoexchangecurrencyatsomefuturedateandsomespecifiedprice(alsocalledaforwardcontract)◦Forwardrate–theexchangeratespecifiedintheforwardcontract◦Iftheforwardrateishigherthanthespotrate,theforeigncurrencyissellingatapremium(whenquotedas$equivalents).◦Iftheforwardrateislowerthanthespotrate,theforeigncurrencyissellingatadiscount.20-15Priceofanitemisthesameregardlessofthecurrencyusedtopurchaseit.RequirementsforabsolutePPPtohold:◦Transactioncostsarezero◦Nobarrierstotrade(notaxes,tariffs,etc.)◦NodifferenceinthecommoditybetweenlocationsFormostgoods,AbsolutePPPrarelyholdsinpractice.20-16Providesinformationaboutwhatcauseschangesinexchangerates.Thebasicresultisthatexchangeratesdependonrelativeinflationbetweencountries:◦E(St)≈S0[1+(hFC–hUS)]TBecauseabsolutePPPdoesn’tholdformanygoods,wewillfocusonrelativePPPfromhereonout.20-17SupposetheCanadianspotexchangerateis1.18CanadiandollarsperU.S.dollar.U.S.inflationisexpectedtobe3%peryear,andCanadianinflationisexpectedtobe2%.◦DoyouexpecttheU.S.dollartoappreciateordepreciaterelativetotheCanadiandollar?SinceinflationishigherintheU.S.,wewouldexpecttheU.S.dollartodepreciaterelativetotheCanadiandollar.◦Whatistheexpectedexchangerateinoneyear?E(S1)=1.18[1+(.02-.03)]1=1.168220-18IRPisanarbitragecondition.