当前位置:网站首页 >留学文书范文

热门问题

留学文书范文

The Impact on Profit of change the exchange rate 
1.0 Introduction
With numerous studies of exchange rates having been published ( Akiba 2004, Andrade and Prates 2013, Davidson 1998, Harvey 2009a, Kaltenbrunner 2015, Lavoie 2002-3, Lavoie 2000, Moosa 2007-8, Moosa 2004, and Smithin 2002). In general, these come to the conclusion that currency prices are driven by the profit determine of financial investors in all place of the world.
However exchange rate is floating, which could be bring risk to investors, Therefore, this paper analysis in change the current spot exchange rate will be have impact on investor profit.
 
2.0  Definition
The Current spot exchange rate is current market trade price, and decision of the current spot exchange rate is expect future exchange rate level and difference in interest rate of two countries, due to investors has rational expectations. Therefore they can expectation that the long term exchange rate will be in a balance exchange rate situation. Also the long term balance exchange rate is determine by two countries economic power. In short term, the current spot exchange rate will deviation from long term exchange rate level, the deviation will be result in adjustment in exchange rate.
Forward rate is the transaction parties deal with an agreement of trading of foreign exchange, agreed at an exchange rate for foreign exchange actual settlement in the future, when forward exchange rate to the delivery date , the transaction parties delivery at the deal with of exchange rate and amount of money before. Forward foreign exchange trading is an appointment transaction, which is the foreign exchange buyer demand for foreign exchange funds in different time, and in order to avoiding foreign exchange risk, the foreign exchange buyer would like to make an appointment forward rate.
Dollar-Euro forward rate from Apr to Oct 2017

Source: https://finance.yahoo.com
Take this chart as a example, analysis Dollar -Euro forward rate price change April of 2017 to October of 2017, this chart show that the forward rate price are change at any time, such as in 12 May 2017 the forward rate price in a higher situation, which is the high in 1.650, low in 1.130, the close price at 1.300. However, in 5 July 2017 the forward rate became very low, the high is in 1.060, the low is in 1.030, end of the day the close price is 1.040. then the forward rate price growth, and became the higher situation in 12 September 2017, in the day the high price is 1.350, the low price is 1.170, end of the day price close at 1.290. According to analysis above we can find that the buyer would like to buying in 5 July 2017, but selling in 12 September 2017, because buy in low price and sell in high price, which is benefit to buyer. For seller they would like to selling in 12 May 2017, because they selling high price, they can get higher profit. due to the forward rate is floating, if we want avoiding risk, make an appointment price is benefit to transaction parties.
The American call option is call option buyer use a certain price buy commodity or future contacts within the prescribed period from seller, but do not must obligation to buy. The different between American call option style and European call option style is that American call option style can be transaction at any time till expiration date, however, European call option just can be transaction in expiration date, therefore, European call option is more cheap than American call option.
 
3.0 The float exchange rate  impact on profit
Exchange rate will bring risk to buyer, but for forward rate buyer which is an opportunity to earn money. For example:
 
the current spot exchange rate is $1.55=1 euro. And the three month forward rate is $1.6=1 euro,consider a three-month American call option on 62500 euro with a strike price of $1.50=1 euro.immediate exercise of this option will generate a profit of
Settle             Gain/Loss                Account Balance
$1.55             -3125                    59335=62500-3125
$1.60             -6250                    56250=62500-6250                             
$1.50             3125                     65625=62500+3125
Because profit= spot rate -strike rate
Therefore profit=(62500*1.55)-(62500*1.50)=3125
According to Calculate show that if buyer immediate exercise of this option with a strike price of $1.50=1 euro could earning $3125. Also show that choice American call option is more benefit to buyer.
 
4.0 Conclusion
Currency prices are driven by the profit determine of financial investors in all place of the world. Exchange rate has great effect at world economic, that because exchange rate not only bring profit to investors but also with risk to investors.
If two country have transaction in economic, which is must be contact with exchange rate, if they can master of the trend of exchange rate change, they can avoid risk and get profit from exchange rate floating.
  • 留学文书写作
  • 留学指南
  • 服务价格
  • 留学DIY申请
  • 联系我们