TEMA: FINANZAS INTERNACIONALES

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Exercise: exhange rate that muist be paid if the option is exercised

Derivative Instruments:

Hedging

Speculating

CALL OPTION. BUY AT THE CHEAPEST PRICE

PUT OPTION. SELL AT THE GIGHEST PRICE

CLASE DEL MARTES 20 DE FEBRERO

Exchange Rate

Risk Exposure………Types of rick exposure

Internacional Parity Conditions….Analyze risk

Volatility defines risk

How risks (volatility) affects the multinacional enterprise???

Value of a firm: sumo f cash flows of the firm

TYPES OF RISK EXPOSURE

1. Transaction

Price $100 Spot Exchange Rate=11 $/USD

$1100

Time 0

Time receives Money: 1 Month $10/usd $10000 Unexpected Exchange Rate movement

2. Operative or economic

3. Accounting or Translation

every year consolidation of financial statement..allocate assets, evaluate performance, give compensations, analyse performance efficiency / compensations.

Dervatives to Deal with risks by anticipated contracts to eliminate whole risks, options to eliminate half of risk, swaps reduce or eliminate risk

internacional parity conditions…

law of one price

E..price of acurrency

Domestic Laptop price $20000

Exchange rate S=$10/usd

Foreign Laptop Price: USD$2000

The same good the same value

You can assess the s with prices (local, foreign)

Baskets of goods

Absolute power parchase parity

Big Mac Index

PurchasePowerParity LO TRAE TODO

∏ increase,increase competitiveness

prices influence Exchange rates

PPP applies in the long run

Increase ∏---- increase the interest rate …. Increase Exchange rate devaluation,deppreciation,

Increase interest rate=deppreciation or devaluation

Increase Π increase interest rate domestic fischer effect

Interest rate(nominal interest rate)= π(inflation) + r (real interest rate) + r ∏