arbitrage and the theory of interest rate parity

... amount in the fund at the beginning of the period) Thus, the effective rate of interest in is the ratio of the amount of interest earned during the period to the amount of principal invested at the ... amount of interest earned in one period divided by the principal at the beginning of the period One can define the effective rate of interest for any period: The effective rate of interest in the nth ... that annual interest rate changes from one year to the next Let i1 be the interest rate for the first year, i2 the interest rate for the second year,· · · , in the interest rate for the nth year...

Ngày tải lên: 05/11/2014, 13:29

Ngày tải lên: 07/03/2014, 02:20

... three theories, in the CAPM context, to examine the expected impacts on banks stock returns in the face of announced interest rate changes: Stiglitz and Weiss (1981) Optimal Interest Rate Theory and ... on the nature of the interest rate sensitivity Stone's work was built on and further enhanced by Lynge and Zumwalt (1980) who found that interest rate sensitivity varied depending on the term of ... measure the impact of these cash rate changes, by examining the average abnormal and the cumulative abnormal returns of the common stock prices of non-financial stocks using an index of their daily...

Ngày tải lên: 15/03/2014, 01:20

... log of the interest rate, which is positive and highly significant The inclusion of the interest rate variable reverses the sign on the variable rate dummy variable, which is now negative and ... in the modelling The price lenders have to pay for their funding is a key variable of interest in the analysis In the case of Ireland up to the end of 2008, lenders tended to use the ECB base rate ... shows a cross-plot of the standard variable rate against the arrears rate for the 2009 to 2011 period A cross-plot of variable rates and arrears for the earlier period up to the end of 2008 would...

Ngày tải lên: 15/03/2014, 14:20

... financing just equals the floating rate on the interest rate swap plus the difference between the interest rate the firm pays on its outstanding fixed -rate debt and the fixed interest rate it receives ... floating -rate debt at the outset? The next two sections explore the rationales that have been offered to explain the widespread use of interest rate swaps INTEREST RATE SWAPS, ARBITRAGE, AND THE THEORY ... COMPARISON OF INTEREST RATE FUTURES AND INTEREST RATE SWAPS A discussion of the economic role of interest rate swaps would not be complete without at least some mention of interest rate futures Interest...

Ngày tải lên: 22/03/2014, 17:20

... least the near end of the yield curve Transmission of policy rate changes to the whole structure of interest rates is thus effective But uncertainty about the path of future interest rates (and ... sense; (b) the effects of Government policy on the market for borrowing by the private sector and the problem of controlling the desired rate of investment; and (c) to the burden of interest charges ... vis-à-vis the Bank of England “who must manage the gilt-edged market”: “there must be the greatest possible community of view between [the Treasury and the Bank of England] … none of our suggestions...

Ngày tải lên: 29/03/2014, 13:20

... abab}, and {aa, ab, aab, ba, bb, bab} The first of these is the union of {a} and {b}, the second is the concatenation of {a} and {b}, the third is the union of the first and second, the fourth is the ... (n) is the set of prime factors of n e (Here A is the set of all finite sets of primes and B is the set N − {0}.) g : A → B, where g(S) is the product of the elements of S (The product of the elements ... close resemblance of the statements 1–3 to the recursive definition of Expr The outline of the proof is provided by the structure of the definition We illustrate the technique of structural induction...

Ngày tải lên: 31/05/2014, 00:58

Ngày tải lên: 02/01/2015, 17:34

... to the theory of light – provided that the speeds are less than about 300mph (which is certainly the situation at take of and landing) he rôle of viscosity is important in aerofoil theory, and ... on the ad to read more Fluid Mechanics and the Theory of Flight Introduction and Basics Note: A steady low is one for which the velocity ield is independent of time, and then the families of ... Mechanics and the Theory of Flight Introduction and Basics here are two cases of interest: irst, for a viscous luid, both u and w are zero at the inner surface of the pipe (because there can...

Ngày tải lên: 09/03/2016, 10:20

... strands of the literature of the banks’ interest rate risk (See Staikouras (2003) and Staikouras (2006) for a survey) The first one is about the determinants of the banks’ exposure to interest rate ... case especially the shape of the (past and current) term structure of interest rates We call this variable the change in the systematic factor of the exposure to interest rate risk The variables ... instance, the duration, and the weighted sum of the positions’ duration is a measure of the bank’s exposure to interest rate risk (See, for instance, Sierra and Yeager (2004)) The main problem of these...

Ngày tải lên: 16/02/2014, 06:20

... Malaysia after the Asian crisis) The scope for a successful interest rate defense” of a fixed exchange rate depends on the extent of the deviation from interest rate parity (e.g., Flood and Rose (2001)) ... currency at the spot exchange rate against the U.S dollar and deposited in the country of reference At the end of the month the local currency proceeds are converted to U.S dollars at the end -of- month ... including the elimination of exchange controls, stabilization of exchange rates, control of inflation, removal of restrictions on capital inflows and outflows, removal of interest rate restrictions, and...

Ngày tải lên: 06/03/2014, 14:20

... research in the area of bank interest- rate risk and the behavior of NIM has been largely limited since the late 1980s, when the savings and loan crisis brought the issue of interest- rate risk to the ... reported profitability The degree to which the bank can change the portfolio mix and/ or hedge in the short term would determine the magnitude of the effect of interest- rate changes and other shocks ... best consider the interest- rate sensitivity of net interest margin, we consider the net interest margin as a function of interest rates on assets and liabilities and the shares of each as a ratio...

Ngày tải lên: 15/03/2014, 14:20

... strength of the relationship between the MPC’s own forecasts and the interest rate decisions of the MPC on the official Bank Rate The data used are the historical forecasts for British CPI inflation and ... of a reasonable significance level Despite variations of the responses across the conditional distribution of both the MPC interest rate decisions and the member interest rate average, these interest ... website They refer to the decision of the MPC about the level of the key interest rate, the Official Bank Rate, from 1997Q3 to 2009Q4.2 Though available on a monthly basis, I select the values of March,...

Ngày tải lên: 22/03/2014, 23:20

... downward bias in the variability of the real rate depending on the level of the nominal equilibrium rate of interest The downward bias in the variability of the real rate accounts for the reduced ... above, the distortion of output and inflation distributions is driven by a distortion of the real interest rate The left-hand panels of Figure report the upward bias in the mean real rate and the ... credible the nominal interest rate will jump to the level of the foreign rate and the period of zero interest rates will end Here we allow for an important difference to our analysis of the proposals...

Ngày tải lên: 22/03/2014, 23:20

... models In these models changes in the nominal interest rate influence the real interest rate due to the presence of price rigidities; the real interest rate determines the level of output; and the gap ... elasticity of money demand (in line with Andres et al (2006) and Ireland (2004)) Interest rate elasticity of money demand (in line with Andres et al (2006) and Ireland (2004)) Weighting parameter of ... achieve the interest rate prescribed by the optimal policy Technically, mt is determined by equation (16) conditional on the desired interest rate and the current values of real income and the price...

Ngày tải lên: 29/03/2014, 13:20

... and the questioning of the long-term viability of the Eurozone as the prospect of a breakup of the euro is increasingly viewed as possible.” While the potential fiscal and political causes of the ... most of the members of Euroland probably find that the interest rate decisions of the ECB are consistent with their national economic conditions most of the time, this may no longer be the case ... Finland, France, the Netherlands, the Czech Republic, and the UK are explored in more detail It should be noted that due to the concerns about the accuracy of the HP filter towards the end of...

Ngày tải lên: 29/03/2014, 13:20

... INTEREST RATE PARITY Suppose the US and UK three-month interest rates are respectively 6% and 8% per annum and that the spot rate is $1.55/£ a Calculate the forward premium (or discount) on the ... $1.542402/£ Suppose the spot rate is $ 0.20/FF The US one-year rate is 6% The forward rate is $0.1923/FF a What is the current one-year French interest rate that will satisfy the Interest Rate Parity? b ... Answers to end -of- chapter questions Describe how covered interest arbitrage acts to enforce Interest Rate Parity Describe the impact of each transaction on interest rates and exchange rates Provide...

Ngày tải lên: 12/07/2014, 10:57

... exchange rate and the balance of payments in Vietnam in the future New contributions of the thesis The thesis The relation between exchange rate and the balance of payments – The theory and reality ... Power Parity explains the long-term changes of exchange rate (The theory of the Interest Rate Parity) and explains the short-term fluctuations of exchange rate 1.1.2 Policies of exchange rate ... improve the relation between exchange rate and the balance of payments, the author bases on evidence to predict the trend of the changes of exchange rate of VND and other currencies to USD The results...

Ngày tải lên: 23/08/2014, 14:15

... affected by the creation and use of fiat-money Crucial to this purpose is the functional separation that the theory operates between banks and firms The macroeconomic focus of the theory, however, ... Maynard, 1936, The General Theory of Income, Interest and Money, Harcourt, Brace and World, New York, 1964 , 1937a, Alternative Theories of the Rate of Interest, The Economic Journal, ... creating and advancing liquidity to producers; along the circuit, the financial system governs the supply and demand of funds and, at the end of the process, it determines the condition for the closure...

Ngày tải lên: 24/10/2012, 09:33

... Risk and Term Structure of Interest Rates • The risk structure of interest rates looks at bonds with the same term to maturity and different interest rates • The term structure of interest rates ... n The n-period interest rate equals the average of the one-period interest rates expected to occur over the n-period life of the bond Expectations Theory • Explains why the term structure of interest ... three but not the first two Liquidity premium theory combines the two theories to explain all three facts Term Structure of Interest Rates – Fact Expectations Theory • The interest rate on a long-term...

Ngày tải lên: 05/01/2014, 16:56