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Materi Asistensi Keuangan Internasional …

Materi Asistensi Keuangan Internasional

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  • 1. Pertemuan 721 November 2012By:David Parlindungan Siregar
  • 3. Terminology• Cross rate• Eurobond• Eurocurrency• Foreign Bonds• LIBOR (London Interbank Offer Rate)• Swap– Currency– Interest rate
  • 4. Foreign Exchange Markets andExchange Rates• Exchange rate– Direct Quotation– Indirect Quotation• Cross-Rates and Triangle Arbitrage
  • 5. Types of Transactions• Spot Trade– Spot Exchange Rate• Forward Trade– Forward Exchange Rate
  • 6. Purchasing Power Parity• Definition– Exchange rates adjusts to keep purchasing powerconstant among currencies• Type– Absolute Purchasing Power Parity– Relative Purchasing Power Parity
  • 7. Absolute PPP• Assumption:– No transaction cost (transportation, insurance,spoilage, etc.)– No barriers (tariffs, taxes, etc.)– Identical goods
  • 8. Absolute PPP• Example:• P$ = dollar price standard community basket• P£ = pound price standard community basket• If– P$ = $225– P£ = $150• Exchange rate = $1,5/ £
  • 9. Relative PPP• Main relation : relative inflation rate• Tells what determines the change in theexchange rate over time, not the absolutelevel of the exchange rates
  • 10. Relative PPP• Example:• Inflation rate in France is 3%, where US has5%. The expected spot currency rates for thenext year is 1,20 €/USD and today spot rate is0.70 €/USD. Explain whether PPP relativeshold or not?
  • 11. Interest Rate Parity• Definition• Covered Interest Arbitrage– The condition applied• Formula for interest rate parity• Forward rates determination based on IRP
  • 12. Example• r$ = 2.24%• r€ = 2.70%• S = 1.2017 €/$• F = 1.19854 €/$Assume we invest $1000. Illustrate whetherinterest rate parity is hold or not?
  • 13. Fisher Effect• Fisher effect state that real interest rates areequal across the world• Uncovered Interest Parity– Condition stating that the expected percentagechange in the exchange rate is equal to thedifference in interest rate• Combination of PPP, IRP, and UFR (unbiasedforward rates  condition stating that thecurrent forward rate is an unbiased predictorof the future spot exchange rate
  • 14. Fisher Effect
  • 15. International Capital Budgeting• 2 methods for counting the NPV of suchcapital budgeting:– The home currency approach– The foreign currency approach
  • 16. Home Currency Approach• Convert all the foreign currency cash flow tofunctional currency and discount the cashflow with local discount rate
  • 17. Foreign Currency Approach• Determine the required return on foreigninvestments and discount the foreign cashflow with the foreign required return. Finally,convert the NPV into the functional currency
  • 18. Exchange Rate Risk• Short-Run Exposure– Use forward or other derivatives• Long-Run Exposure– Use fundamental hedging• Translation exposure– Just accounting matter
  • 19. Latihan Soal• Diandra Corp, sebuah perusahaan AS sedangmengevaluasi pilihan investasinya senilai € 30juta untuk membuka operasi di Perancis.Investasi ini akan memberikan perusahaancash inflow sebesar €12 juta selama 4 tahun.Diketahui nilai tukar spot untuk euro adalah€0,5 dan return US T-Bill dan risk free aset diPerancis adalah 5% dan 8%. WACCperusahaan adalah sebesar 12%. Hitung NPVdari investasi ini!