Cost of Capital: Spot Rate or Forward Rate?

2015 ◽  
Author(s):  
Howard Qi ◽  
Yan Alice Xie
Keyword(s):  
Cost Of Capital ◽  
Forward Rate ◽  
Spot Rate

Cost of capital: spot rate or forward rate?

2016 ◽  
Vol 48 (40) ◽  
pp. 3804-3811 ◽  
Author(s):  
H. Qi ◽  
Y. A. Xie
Keyword(s):  
Cost Of Capital ◽  
Forward Rate ◽  
Spot Rate

Carry Trade, Exchange Rates, and the Balance-of-Payments

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Nelson H. Barbosa-Filho
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Real Exchange Rate ◽  
Foreign Debt ◽  
Balance Of Payments ◽  
Forward Rate ◽  
Spot Rate ◽  
Financial Constraint ◽  
Carry Trade ◽  
The Real

Abstract This paper presents a partial equilibrium model that integrates interest rate arbitrage with the balance-of-payments constraint to determine the real exchange rate. The sequential logic is the following: (i) carry-trade determines the term premium, with the spot rate showing greater volatility than the forward rate, (ii) uncovered interest rate parity determines the spot rate based on the real exchange rate consistent with a financial constraint, defined as a stable ratio of foreign reserves to foreign debt; and (iii) the trade balance consistent with the financial constraint determines the long-run real exchange rate for a given ratio of domestic to foreign income.

scholarly journals OFFSHORE AND ONSHORE IDR MARKET: AN EVIDENCE ON INFORMATION SPILLOVER

2012 ◽  
Vol 14 (4) ◽  
pp. 323-348
Author(s):  
Yayat Cadarajat ◽  
Alexander Lubis
Keyword(s):  
Exchange Rates ◽  
Information Transmission ◽  
Emerging Market ◽  
Spot Market ◽  
Forward Rate ◽  
Spot Rate ◽  
Currency Markets ◽  
Daily Data ◽  
Egarch Model ◽  
Information Spillover

This paper investigates the information transmission between off-shore and on-shore Rupiah currency markets Indonesian. We found the evidence of persistent volatility in all IDR/USD markets. Using EGARCH model on daily data for the period of 2008 - 2011, this paper provide several empirical conclusions.-First, the persistent volatility in all IDR/USD currency markets is evident. Second, the leverage effects are present in the rupiah exchange rates, indicating that IDR/USD markets have responded more to depreciation than appreciation, which is generally common in emerging market currencies. Third, the evidence of mean spillover are observed to be uni-directional; from NDF to both spot and forward rupiah markets. However, there are two ways return transmission between NDF and forward rate changes in the period of Europe crisis. Fourth, on the volatility, the spillover is only significant from NDF market to spot market for the entire period. However, in the time of crises, there is interdependence between volatility in offshore NDF and onshore spot rate changes, while information transmission is only valid from NDF to forward rate changes, not the other way around. Fifth, the negative spread of domestic interest rate may lead to depreciation pressure on the currency and positive spread may indicate the appreciation pressure. Keywords: Foreign Exchange, Non-Deliverable Forward, exchange rate, spillover, EGARCH.JEL Classification: F31, G13, C51

scholarly journals Tendenciosidade do Mercado Futuro de Câmbio: Risco Cambial ou Erros Sistemáticos de Previsão?

2006 ◽  
Vol 4 (2) ◽  
pp. 123
Author(s):  
Daniel Chrity ◽  
Márcio G. P. Garcia ◽  
Marcelo Cunha Medeiros
Keyword(s):  
International Finance ◽  
Risk Premium ◽  
Futures Market ◽  
Forward Rate ◽  
Prediction Errors ◽  
Spot Rate ◽  
Currency Risk ◽  
Future Change ◽  
The Future ◽  
The Difference

The forward exchange rate is widely used in international finance whenever the analysis of the expected depreciation is needed. It is also used to identify currency risk premium. The difference between the spot rate and the forward rate is supposed to be a predictor of the future movements of the spot rate. This prediction is hardly precise. The fact that the forward rate is a biased predictor of the future change in the spot rate can be attributed to a currency risk premium. The bias can also be attributed to systematic errors of the future depreciation of the currency. This paper analyzes the nature of the risk premium and of the prediction errors in using the forward rate. It will look into the efficiency and rationality of the futures market in Brazil from April 1995 to December 1998, a period of controled exchange rates.

scholarly journals An Empirical Comparison of Forward-Rate and Spot-Rate Models for Valuing Interest-Rate Options

1999 ◽  
Vol 54 (1) ◽  
pp. 269-305 ◽  
Author(s):  
Wolfgang Bühler ◽  
Marliese Uhrig-Homburg ◽  
Ulrich Walter ◽  
Thomas Weber
Keyword(s):  
Interest Rate ◽  
Forward Rate ◽  
Spot Rate ◽  
Empirical Comparison ◽  
Interest Rate Options

Forward rate, spot rate and risk premium: An empirical analysis

1988 ◽  
Vol 124 (1) ◽  
pp. 74-88 ◽  
Author(s):  
Thomas C. Chiang ◽  
Thomas J. Hindelang
Keyword(s):  
Empirical Analysis ◽  
Risk Premium ◽  
Forward Rate ◽  
Spot Rate

scholarly journals Analisa Aplikasi Hedging Sebagai Perlindungan Transaksi Ekspor Oleh Eksportir Di Sulawesi Selatan

2015 ◽  
Vol 10 (1) ◽  
pp. 290
Author(s):  
Usman Adami
Keyword(s):  
Exchange Rate ◽  
Multiple Regression ◽  
External Factors ◽  
Least Square ◽  
Forward Rate ◽  
Multiple Regression Equation ◽  
Spot Rate ◽  
Transaction Data ◽  
Ordinary Least Square ◽  
South Sulawesi

This study aimed to examine the effect of exchange rate value of the forward rate hedging transactions carried out by the exporter. Transaction data used are five export commodities of 6 exporter in Southern Sulawesi with the number of transactions was 612 times. To calculate the multiple regression equation used method OLS (Ordinary Least Square). Results are transasksi value hedging is done by 6 to 5 export commodity exporters in South Sulawesi was very influenced significantly by Value Forward Spot Rate (X), with regard to indicators of external factors before deciding to make Hedging Export.

scholarly journals OFFSHORE AND ONSHORE IDR MARKET: EVIDENCE ON INFORMATION SPILLOVER

2012 ◽  
Vol 14 (4) ◽  
pp. 343-368 ◽  
Author(s):  
Yayat Cadarajat ◽  
Alexander Lubis
Keyword(s):  
Exchange Rates ◽  
Information Transmission ◽  
Emerging Market ◽  
Spot Market ◽  
Forward Rate ◽  
Spot Rate ◽  
Currency Markets ◽  
Daily Data ◽  
Egarch Model ◽  
Information Spillover

This paper investigates the information transmission between off-shore and on-shore Rupiah currency markets Indonesian. We found the evidence of persistent volatility in all IDR/USD markets. Using EGARCH model on daily data for the period of 2008 - 2011, this paper provide several empirical conclusions.-First, the persistent volatility in all IDR/USD currency markets is evident. Second, the leverage effects are present in the rupiah exchange rates, indicating that IDR/USD markets have responded more to depreciation than appreciation, which is generally common in emerging market currencies. Third, the evidence of mean spillover are observed to be uni-directional; from NDF to both spot and forward rupiah markets. However, there are two ways return transmission between NDF and forward rate changes in the period of Europe crisis. Fourth, on the volatility, the spillover is only significant from NDF market to spot market for the entire period. However, in the time of crises, there is interdependence between volatility in offshore NDF and onshore spot rate changes, while information transmission is only valid from NDF to forward rate changes, not the other way around. Fifth, the negative spread of domestic interest rate may lead to depreciation pressure on the currency and positive spread may indicate the appreciation pressure.Keywords: Foreign Exchange, Non-Deliverable Forward, exchange rate, spillover, EGARCH.JEL Classification: F31, G13, C51

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