Agentleintroduction(国际金融(香港大学,WONGKa

1InternationalFinance:AgentleintroductionWONGKaFu10thJanuary20012InternationalFinanceisabout...ExchangerateOpenMacroeconomies3InternationalFinancestudiesEffectsofchangesinexchangeratesoneconomies:pricelevels,unemployment,output,import-export,etc.Thedeterminantsofexchangerates:fiscalandmonetarypolicies,performanceoftheeconomies,etc.Theoperationsandinterdependenceofopeneconomies4ExchangerateisimportantbecauseEachcountryhasitsowncurrency,andhencemonetarypolicy.Countriesareopen,i.e.,non-zerointernationaltradeamongcountries.5ExchangeratemarketfacilitatesthetradeofgoodsbetweentwocountriesJapaneseproductsUSproductsProblem:doublecoincidenceofwants6ExchangeratemarketfacilitatesthetradeofgoodsbetweentwocountriesJapaneseproductsUSproductsJapaneseYenUSdollarForeignexchangemarket7Whatisexchangerate?ThepriceofacurrencyintermsofanothercurrencyExamples:thepriceofUSDintermsofHKD,7.8HKD/USDthepriceofUSDintermsofYen,116.96Yen/USDthepriceofEurointermsofUSD,0.9436USD/EuroRatesfromExchangeratedefined:ThepriceofcurrenciesTheamountofdomesticcurrencyyouhavetopaytobuyaunitforeigncurrency(bank’ssellingrateoftheforeigncurrency)Theamountofdomesticcurrencyyouwillreceivewhenyousellaunitofforeigncurrency(bank’sbuyingrateoftheforeigncurrency)9Wherecanyoufindtherates?Forexamples:BankofEastAsiaBloomberg:CNNFN:ManyothersavailableinourInternetresourcespage.10SupplyanddemandconditionsdeterminesexchangerateExchangerateisdeterminedbysupplyanddemandbecauseForeignexchangemarketiscompetitiveExchangerateisapriceand11SupplyanddemandconditionsdeterminesexchangerateSupposeDemandforJPYincreasesSuddenlyalotofpeoplewanttoswitchfromUSDtoJPYPriceofJPYwillincrease,i.e.,needmoreUSDtobuyoneunitofJPYSupplyofUSDincreasesPriceofUSDwilldecrease,i.e.,needlessJPYtobuyoneunitofUSD12Bank-notemarkete.g.,Bank’ssellingrateBank’sbuyingratesellingrate-buyingrate=spreadbecauseofthepaperworkinvolvedbank’sopportunitycostandriskofholdingforeigncurrenciesnecessarysecurityprecautionspossibilityofreceivingcounterfeitbills13TelegraphictransferOftenwritteninshortformTT.ForTT,spreadissmallerbecauseoflesspaperworkinvolvedbasicallybankhasnoopportunitycostandriskofholdingforeigncurrenciesnoneedforsecurityprecautionsnoneedtoworryaboutthepossibilityofreceivingcounterfeitbills14SpreadVarieswiththesizeofyourorder/purchase.Thelargeryourordersize,thesmallerthespread,thatis,thebankcanofferyouabetterrate.Mainlybecauselesspaperworkisinvolved.15Bank’sbuyingrateBank’ssellingrate?Definition:Bank’sbuying(selling)rateisthe“exchangerate”whenthebankbuys(sells)theforeigncurrencyfrom(to)you.Bank’sbuyingrateBank’ssellingrateiftherateisquotedasforeigncurrencyperlocalcurrency,e.g.,inUS.Bank’sbuyingrateBank’ssellingrateiftherateisquotedaslocalcurrencyperforeigncurrency,e.g.,inHK.Thatis,whatyouseefromtheBankofEastAsiapage()16Bank’sbuyingrateBank’ssellingrateiftherateisquotedasforeigncurrencyperlocalcurrency,e.g.,inUS.Bank’sbuyingrate=theamountofUSDyouhavetogivetothebankinordertoobtainoneHKD(note:thebankbuysUSDfromus,andwesellUSDtothebank.)Bank’ssellingrate=theamountofUSDyouwillreceivefromthebankwhenyouselloneHKD(note:thebanksellsUSDtous,andwebuyUSDfromthebank.)17SpotforeignexchangemarketMostplayershaveahostofdifferentcurrency-denominatedbankaccounts.Thedepositsaretransferredfromsellers’tobuyers’accountBanksandbrokersarelinkedtogetherbytelephone,telex,asatellitecommunicationsnetwork(SWIFT)andelectronicbrokersystems(EBS)Spread0.1%currencyvalue,ingeneral18Newssources:DowJonesTelerateReutersBloombergCNNFinancialNewscnnfn.com19Exampleofplayers:CitiBank,BankofTokyo-MitsubishiBankofChinaHKMAandmanymoreinstitutionalplayersandcentralbanksandmanymoreindividualstradingthroughinternet20CrossExchangeRatesS(j/k)isthenumberofunitsofcurrencyjperunitofcurrencykinthespotexchangemarketE.g.,j=HongKongdollars;k=U.S.dollarsS(HK/US)=7.8approximately.21S(HKD/USD)vsS(HKD/JPY)S(JPY/USD)SupposenotransactioncostTogetHKD,aholderofUSDcanusetherateS(HKD/USD)Or,he/shecanbuyJPYattherateS(JPY/USD)andthenuseJPYtobuyHKDattherateS(HKD/JPY).Ineffecthe/sheisexchangingatarateofS(HKD/JPY)S(JPY/USD)22S(1/3)vsS(1/2)S(2/3)1=HKD;2=JPY;3=USDSupposenotransactioncostTogetcurrency1,aholderofcurrency3canusetherateS(1/3)Or,he/shecanbuycurrency2attherateS(2/3)andthenusecurrency2tobuycurrency1attherateS(1/2).Ineffecthe/sheisexchangingatarateofS(1/2)S(2/3)23S(HKD/USD)vsS(HKD/JPY)S(JPY/USD)HKDJPYUSDS(HKD/JPY)S(JPY/USD)S(HKD/USD)S(USD/HKD)S(USD/JPY)S(JPY/HKD)24S(HKD/USD)S(HKD/JPY)S(JPY/USD)HKDJPYUSDS(HKD/JPY)S(JPY/USD)S(HKD/USD)USDHKD25ThePrincipleofNoArbitrageIfS(1/3)S(1/2)S(2/3)andthereisnotransactioncost(say,S(1/3)=3,S(1/2)=2,S(2/3)=1)Wecansell