Group 1 Report Flashcards
Refer to the value at which one currency can be exchanged for another. It represents the rate of conversion between two currencies and determines
the relative value of one currency in terms of
another.
Exchange Rates
are essential in international
trade, investment, and finance as they facilitate the
exchange of goods, services, and capital between
countries.
Exchange rates
is a complex task that involves analyzing numerous
factors, including economic indicators, political events,
market sentiment, and technical analysis.
Forecasting Exchange Rates
7 Common ways to Forecast Currency Exchanges Rates
(1) Fundamental Analysis
(2) Technical Analysis
(3) Relative Economic Strength Model
(4) Econometric Model
(5) Purchasing Power Parity (PPP)
(6) Interest Rate Parity
(7) Balance Payment Theory
This forecast method includes all
the external factors such as
monetary policy, domestic and
foreign government policy, and
global economic and political
conditions.
Fundamental Analysis
This approach doesn’t consider
the influence of external forces.
Rather, it uses patterns
discovered from historical price
data and statistics to forecast
future movement.
Indicators,
trendlines, and candlestick and
chart patterns are essential
instruments of technical
analysis
Technical Analysis
This approach looks at the strength of economic growth in different
countries in order to forecast the direction of exchange rates.
The rationale behind this approach is based on the idea that a strong
economic environment and potentially high growth are more likely to
attract investments from foreign investors.
Relative Economic Strength Model
This FX rate forecast method is
personal, as it differs between
traders. Here, Forex traders select
whatever metrics they believe
influence the currency market the
most.
Econometric Model
While the relative economic strength
approach gives a direction for currency
movement, _____________________
says what the rate is supposed to be.
Purchasing Power Parity
This method asserts that the price of
goods and services should be equal,
regardless of the country.
If there are
any differences in price, a trader can
calculate the suitable exchange rate
that will make goods or services cost
the same.
Purchasing Power Parity
is quite similar to purchasing power parity. But PPP
focuses on the prices of goods, while _____ focuses on currency and interest rates.
Interest Rates Parity
The general concept of this model is that the differential between interest rates
should equal the differential between spot and forward exchange rates.
Interest Rate Parity
if an investor exchanges a domestic currency for a foreign one and invests it
in a foreign economy or uses a domestic currency to invest in the home country
and converts the proceeds from the investment into a foreign currency, their
earnings will be the ______ in both cases.
Same
This foreign exchange model determines future currency values by considering a
country’s rate of imports and exports.
The theory behind this method is that the
domestic currency appreciates when it exports more than it imports and
depreciates when the opposite occurs.
Balance Payment Theory
Measuring Exposure to Exchange Rates Fluctuations
(1) Purchasing Power Parity Argument
(2) The Investor Hedge Argument
(3) Stakeholder Diversification Argument
(4) Currency Diversification Argument
Types of Exposure
(1) Transaction Exposure
(2) Economic Exposure
(3) Translation Exposure
Involves using financial tools or strategies to protect
against potential losses caused by changes in exchange
rates.
It is commonly used by individuals, businesses, or
investors involved in international trade or holding
foreign assets.
Hedging Exposure to Exchange Rates Fluctuations
is a strategy that seeks to limit risk exposures in financial assets.
Hedge
is a strategy for reducing exposure to investment risk.
Hedging
The goal of hedging isn’t to make money; it’s to ______ from losses.
protect
________ commonly referred to as exchange-rate risk. arises from the change in price of one currency in relation to another.
Currency risk
Investors or companies that have assets or
business operations across national borders are
exposed to currency risk that may create
____________________________
unpredicted profits and losses.
Ways to Hedge Exchange Rate Exposure
(1) Currency Options
(2) Currency swaps
(3) Forward Contracts
(4) Natural Hedging
Provides the holder with the right,
but not the obligation, to buy or
sell a specific amount of a
currency at a predetermined
exchange rate within a specified
time period.
Currency options
It is an agreement between
two parties to exchange a
certain amount of one
currency for another and then
reverse the transaction at a
predetermined future date.
Currency swaps
It is an agreement between two
parties to exchange a specific
amount of one currency for another
at a predetermined exchange rate
and future date.
Forward contracts
Refers to managing
exchange rate exposure
through operational
adjustments within a
business.
Natural Hedging
are concerned with what is right and wrong, good and bad and how we use that information to decide our actions in the real world.
Ethical issues
Examples of Ethical Issues
(1) Child labour
(2) Unsafe Working Conditions
(3) Discrimination
(4) Sexual harassment
(5) Unequal Pay
(6) Different beliefs
is an area of international relations theory which in one way or another concerns the extent and scope of ethical obligations between state in an era of globalization.
International Ethics
are the relationships between countries, including their governments, economies, cultures and peoples.
International relations
International relations often referred to as ______________
International Affairs
Three Perspectives of Ethics in International Finance
(1) Realist
(2) Liberal
(3) Ideal
Emphasizes the pursuit of national interests and power as the driving forces behind states behavior in international relations.
Realist
Emphasizes the importance of individual rights, democracy, international cooperation, and the rule off law in shaping international relations.
Liberal
Emphasizes the importance of shared ethical principles and a sense of global community in international relations.
Ideal
Principles which should guide International Relations
- Equity
- Justice
- Human Dignity
- Transparency
- Responsibility to Protect Citizens
Some Ethical Issues at International Level
- Human Rights Violation
- Climate Change
- Disarmament
- Intellectual Property Rights
- Global Commons
- Global Poverty
- Power Asymmetry
- Genocide
- Terrorism
- Issues with World Trade Organization, IMF and World Bank
is the disallowance of the freedom of thought and movement to which all humans have legally have a right.
Human Rights Violation
Counties that are least responsible for climate change and have the least economic capacity to fight the effects of climate change are the most
affected ones.
International Equity Concerns
There are
issues in defining and differentiating the responsibilities between
present and future generations as well as developed and
developing countries.
Issues of Common but Differentiated Responsibilities
don’t consider climate change to be real.
Climate Sceptics
Cause of disarmament at the international stage is being
promoted by those states, which have massive reserves of
nuclear armaments, missiles etc.
Cause of _______ at the international stage is being
promoted by those states, which have massive reserves of
nuclear armaments, missiles etc.
Disarmament
The developed countries are depriving the poor
countries of accessing the new technologies (even
life-saving drugs) by the restrictive clauses of IPRs.
Intellectual Property Rights
Defined as those parts of the planet that fall outside national jurisdictions and to which all nations have access.
Global Commons
Some of the issues with global commons are as follows:
- Covid 19
- Overfishing
3 Pollution and Accumulation of Plastic Waste
4 Access and Equity
________ largely remains out of sight for those who are not living it This enhances insensitivity amongst the well off nations
Global poverty
Refers to an imbalance of power, influence, and resources among different countries or states in the international system.
Power Asymmetry
__________________________________________have
asymmetric voting
rights in these
bodies.
Western First World Countries
The Basic Principles Necessary for Better International Relations
(1) Non-interventionism
(2) Self-determination
(3) Collective Security
(4) Amity
which states that a country should not intervene
with another country’s domestic policies.
Non-interventionism
which means that all people have the right to
choose their own government without external interference.
Self-determination
which can be defined as an agreement among
several countries to help each other defend themselves against
aggression.
Collective security
which can be described as a state of goodwill among different
nations or peoples.
Amity
Looking at UN funding options
- Scarcity
- Inequality
- Lack of Information
- Wealth Destruction
Why funding of countries is done?
- Philosophical Explanation
- Economical Explanation
