International Finance: Putting Theory Into Practice

4.7. APPENDIX: THE FORWARD FORWARD AND THE FORWARD RATE AGREEMENT 163 replicate a currency-X spot deposit or loan by swapping a ...

164 CHAPTER 4. UNDERSTANDING FORWARD EXCHANGE RATES FOR CURRENCY Table 4.3:Term Structures and their Linkages rate orpvfactor fo ...

4.7. APPENDIX: THE FORWARD FORWARD AND THE FORWARD RATE AGREEMENT 165 Figure 4.7:Term Structures: Forward, Spot, and Two Types o ...

166 CHAPTER 4. UNDERSTANDING FORWARD EXCHANGE RATES FOR CURRENCY Figure 4.8:Extracting spot and forward rates from theJPYswap ra ...

4.7. APPENDIX: THE FORWARD FORWARD AND THE FORWARD RATE AGREEMENT 167 everytotaltime to maturityn. So in the situation depicted ...

168 CHAPTER 4. UNDERSTANDING FORWARD EXCHANGE RATES FOR CURRENCY 3.7 Test Your Understanding 3.7.1 Quiz Questions Which of the ...

4.8. TEST YOUR UNDERSTANDING 169 3.7.2 Applications Check analytically the equivalence of the two alternative ways to do the fo ...

170 CHAPTER 4. UNDERSTANDING FORWARD EXCHANGE RATES FOR CURRENCY (b) Check that if taxes are neutral, and the tax rate is 30%, a ...

Chapter 5 Using Forwards for International Financial Management In this chapter, we discuss the five main purposes for which for ...

172 CHAPTER 5. USING FORWARDS FOR INTERNATIONAL FINANCIAL MANAGEMENT Figure 5.1:Swap Quotes, bid and ask, fromDe Tijd Termijnkoe ...

5.1. PRACTICAL ASPECTS OF FORWARDS IN REAL-WORLD MARKETS 173 Figure 5.2: The bid-ask spread in a forward is wider than in a spot ...

174 CHAPTER 5. USING FORWARDS FOR INTERNATIONAL FINANCIAL MANAGEMENT The right of offsetFirst and foremost, a forward contract ...

5.1. PRACTICAL ASPECTS OF FORWARDS IN REAL-WORLD MARKETS 175 1.5×0.25 =usd375,000 with the bank, which remains with the bank unt ...

176 CHAPTER 5. USING FORWARDS FOR INTERNATIONAL FINANCIAL MANAGEMENT Figure 5.3:Spot/Forward/Money Market Diagram with bid-ask s ...

5.2. USING FORWARD CONTRACTS (1): ARBITRAGE 177 5.2.1 Synthetic Forward Rates It should not come as a surprise to you that, in t ...

178 CHAPTER 5. USING FORWARDS FOR INTERNATIONAL FINANCIAL MANAGEMENT Figure 5.4: Synthetic and actual forward rates: some concei ...

5.3. USING FORWARD CONTRACTS (2): HEDGING CONTRACTUAL EXPOSURE 179 and the choice of (1 +r∗) has an impact of +0.18 percent. Add ...

180 CHAPTER 5. USING FORWARDS FOR INTERNATIONAL FINANCIAL MANAGEMENT net transaction can be hedged. Of course, a firm typically ...

5.3. USING FORWARD CONTRACTS (2): HEDGING CONTRACTUAL EXPOSURE 181 An ongoing firm is likely to have many contracts outstanding, ...

182 CHAPTER 5. USING FORWARDS FOR INTERNATIONAL FINANCIAL MANAGEMENT of course, is what traditional hedging is about, where one ...