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CFA L2 Matheus > 2. Economics > Flashcards

2. Economics Flashcards

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1
Q

Bid Price

A
  • Price @ which the dealer BUYS

- Price where I sell

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2
Q

Offer Price

A
  • Price @ which the dealer SELLS/OFFERS

- Price where I buy

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3
Q

Fwd (Formula)

A

Fwd = Spot * [1 + if*(Act/360)] / [1 + id * (Act/360)]

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4
Q

Dealer v Market

A

Comprar barato: Dealer Offer > Interbank Bid

Vender caro: Dealer Bid < Interbank Offer

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5
Q

Fwd Spread (Formula)

A

Ff/d - Sf/d = Sf/d * [ (Act/360) / 1 + id (Act/360)] (if-id)

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6
Q

How to Close a Fwd

A
  1. Buy currency @ offer / Sell @ the bid
  2. No dia específico, feche a posição fazendo a operação contrária @ preço + bps futuros do tempo T restante
  3. Para saber a ordem da conta, check if what you hold apreciou / depreciou
  4. Desconte a valor presente pelos juros da moeda do payoff (price base)
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7
Q

Rolagem de Fwd no Fechamento (Steps)

A
  1. Close the actual position by spot (mid between bid-offer)
  2. Enters in a new fwd
  3. Calculate net
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8
Q

Parity Conditions

A
  • Covered Interest Rate Parity
  • Uncovered Interest Rate Parity
  • Fisher (domestic and international)
  • PPP (absolute)
  • PPP (relative)
  • Juros sempre nominais (checar)
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9
Q

Covered Interest Rate Parity (formula)

A

Fwd = Spot * (1 + ip)/(1+ib)

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10
Q

Uncovered Interest Rate Parity (formula)

A

Δ%Sa/b = (Ra - Rb)

  • Asset returns should be equal in different countries.
  • Interest rates differential adjusts this
  • Hold in the long run (not ST, MT)
  • Impede profits shorting low yield; long high yield.
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11
Q

Fisher Domestic

A

If - Id (nominal) = (rf - rd) + (πf - πd)

Diferencial nominal de juros = Yield Spread + Inflation Spread

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12
Q

Fisher International

A

Ra - Rb (nominal) = πexpA - πexpB

Diferencial de Juros = Diferencial de Expectativas de Inflação

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13
Q

PPP Absolute

A

Spot = Diferença entre níveis de preço entre 2 países

Pf / Pd = Sf/d

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14
Q

PPP Relative

A

Δ%Spot A/B = (πA - πB)

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15
Q

Ex Ante PPP

A
  • Igual a Relative PPP , mas usa Expected Inflation

Δ%Spot A/B = (πEXPa - πEXPb)

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16
Q

If Ex Ante PPP + UIRP holds

A
  • Juros global é o mesmo
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17
Q

Supply/Demand Channel (BoP)

A

If X > M, more people abroad demand local currency and it appreciates (contraintuitivo)

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18
Q

Portfolio Balance Approach (BoP)

A

Country w/ CA surplus sends capital to country in deficit. Country w/ deficit remains susceptible to selloff.

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19
Q

Debt Sustainability Channel (BoP)

A

Debt/GDP should be sustainable in the long term

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20
Q

Capital Accounts

A

Hot Money may be the bad guy

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21
Q

Mundell Fleming

A

Pensa no fluxo de capitais

↑ High Rates = ↑ Capital Flows (e vice-versa)

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22
Q

Mundell Fleming (Fixed FX)

A

Monetário Expansionista: Argentina vai ter que recomprar FX com reserva cambial, ou seja, não ajuda tanto o monetário

Fiscal Expansionista: Teoricamente pode vender eternamente

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23
Q

Mundell Fleming (High Mobility)

A

Canal Fiscal: Juros (Fluxos de Capital)
↑ Juros (Expansionista) = Moeda APRECIA
↓ Juros (Restritiva) = Moeda DEPRECIA

Canal Monetário:
↓ Juros (Expansionista) = Moeda DEPRECIA
↑ Juros (Restritiva) = Moeda APRECIA

24
Q

Mundell Fleming (Low Mobility)

A

Canal Fiscal: Demanda Agregada
↑ Demanda (Expansionista) = Moeda DEPRECIA
↓ Demanda (Restritiva) = Moeda APRECIA

Canal Monetário: (X-M)
Expansionista = Moeda DEPRECIA
Restritiva = Moeda APRECIA

25
Q

Pure Monetary Approach

A
  • Milton Friedman (mv = py)

- If PPP holds, aumento de oferta monetária aumentará inflação doméstica = repasse cambial.

26
Q

Dornbusch Overshooting Model

A

Prices lag to respond (sticky)
Short Run: ↑ M0 = ↑ CPI does not change
Long Run: ↑ M0 = ↑ CPI = ↓ Sf/d

27
Q

FX Interventions (IMF Guidelines)

A

FX undervalued: don’t act
FX overvalued:
π threat: ↑ M0, mas esteriliza vendendo bonds
π not a threat: Pode imprimir M0

28
Q
  1. Macro Balance Approach (IMF Guidelines)
A

FX aprecia/deprecia p/ fechar a Conta Corrente

29
Q
  1. External Sustainability (IMF Guidelines)
A

FX aprecia/deprecia p/ balanear as Contas Externas

30
Q
  1. Reduced Form Econometric Model (IMF Guidelines)
A

FX = Função de várias coisas

31
Q

Equity and Economic Growth Relationship (Formula)

A

Δ%Peqt = Δ%GDP + Δ%E/GDP + Δ%P/E

32
Q

Cobb-Douglas Function (Formula)

A

Y = T* (K^α) * (L^(1-α))

Production Function

33
Q

Alpha (α) Definition

A

% of GDP allocated to Kapital

34
Q

(1-α) Definition

A

% of GDP allocated to Labor

35
Q

“T” or “A” Definition

A

Total Factor Productivity

36
Q

Capital Deepening Limitations

A

It has diminishing marginal returns

37
Q

Alpha (α) Formula

A

α = rK/Y

38
Q

MPK (Formula / Definition)

A

MPK = r = αY/K

39
Q

Work Productivity Definition

A

Labor Productivity = Growth Technology + Growth Capital Deepening (limited)

40
Q

Growth Accounting Relations

A

ΔY/Y = ΔA/A + α (ΔK/K) + [(1-α) *ΔL/L]

  • Coloca tudo em derivada
  • Usa pra calcular PIB Potencial
41
Q

Potential GDP Formulas

A

1) Δ% GDP = (α * Δ%K) + [(1-α) * Δ%L]
2) Δ% GDP = Δ%Labor Force + Δ%Productivity
3) Δ% GDP = Tech + (αKapital) + [(1-α)Labor]

42
Q

Malthus Model

A
  • Income rises, population growths until additional resources are completely depleted
43
Q

Neoclassical Model

A
  • Parte da função de produção de Cobb-Douglas
  • No equilíbrio, k e y (capital e output per worker) crescem a uma mesma taxa CONSTANTE
  • Nos eixos X e Y estarão k e y, respectivamente
  • No steady state, Capital Deepening não afeta (i) taxa de cresciemnto da economia ou (ii) MPK
44
Q

Output Per Capital Growth Rate (Formula)

A

g* = θ / (1-α)

45
Q

Output Growth Rate (Formula)

A

G* = θ / (1-α) + ΔL/L

46
Q

Fórmula da Constante Y/K

A

Ψ = Y/K = (1/s) * [θ / (1-α)] + δ + ΔL/L, where

s = savings
δ = depreciation

S = [θ / (1-α) + δ + n] *k, pra manter a porra toda

47
Q

Endogenous Growth Theory

A
  • K has no diminishing marginal returns

↑ S ou ↑ Inv = ↑ Rate of Economic Growth

48
Q

Convergence Theories (types)

A

É do modelo neoclássico. Não é endógeno.

1) Abolute: EM will achieve DM because everyone has the same technology
2) Conditional: Convergence occurs only if countries have the same Savings, Population Growth and Production Functions
3) Club Convergence: OECD rules

49
Q

Economics of Regulation RATIONALE

A

1) Informational assymetry

2) Externalities

50
Q

Eco of Regulation PURPOSE

A

1) Regulate commerce (tax, labor, banking, bankruptcy, contract, competition)
2) Regulate financial markets

51
Q

Net Regulatory Burden (Formula)

A
  1. NRB = (Reg Burden - Private Benefits)
  2. Reg Burden = Cost of Compliance for Regulated Entity
  3. Cost of Compliance = Direct + Unanticipated + Unintended
52
Q

Organization Classifications

A
  1. Self-Regulatory Bodies: Regulate its own members. Power from its own members.
  2. Self-Regulatory Org: SRB recognized by the government
53
Q

Regulatory Competition

A

EU v. UK for financial markets

54
Q

Regulatory Arbitrage

A

Buscar jurisdições favoráveis ao invés de mudar o próprio comportamento

55
Q

Regulatory Capture

A

Conflito de interesse entre profissionais de mercado e management de instituições reguladoras

56
Q

Regulatory Intervention Mechanisms

A
  1. Price (tax, subsidies)
  2. Restriction for licenses
  3. Provision of public goods (monopoly - PETR4)

CFA L2 Matheus (9 decks)

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