Sie sind auf Seite 1von 18

Problem 5.1 Paris to St.

Petersburg
On your post-graduation celebratory trip you are leaving Paris for St. Petersburg,
Russia. You leave Paris with 10,000 euros in your money pouch. Wanting to
exchange all of these for Russian rubles, you obtain the following quotes.

Assumptions
Beginning your trip with euros
Spot rate ($/)
Spot rate (Rubles/$)
a) Calculate the cross rate
Cross rate (Rubles/)

b) What would be the proceeds in Rubles?


Converting your euros into Rubles

Values
10,000.00
1.4260
24.75

Problem 5.2 Basel Trading


You receive the following quotes for Swiss francs against the dollar for spot, one-month forward,
3-months forward, and 6 months forward.
Assumptions
Spot exchange rate:
Bid rate (SF/$)
Ask rate (SF/$
One-month forward
3-months forward
6-months forward
a) Calculate outright quotes
One-month forward
3-months forward
6-months forward
b) What do you notice about the spread?

Values
1.2575
1.2585
10 to 15
14 to 22
20 to 30
Bid

Ask

Spread

Problem 5.3 Asian Financial Crisis


The Asian financial crisis which began in July 1997 wreaked havoc throughout the currency markets of East Asia.
Which of the following currencies had the largest depreciations or devaluations during the July to November period?
Which seemingly survived the first five months of the crisis with the least impact on their currencies?
Part a)
July 1997
November 1997
Percentage
Country
Currency
(per US$)
(per US$
Change vs dollar
China
yuan
8.40
8.40
Hong Kong
dollar
7.75
7.73
Indonesia
rupiah
2,400
3,600
Korea
won
900
1,100
Malaysia
ringgit
2.50
3.50
Philippines
peso
27
34
Singapore
dollar
1.43
1.60
Taiwan
dollar
27.80
32.70
Thailand
baht
25.0
40.0
Part b)

Problem 5.4 Forward Premiums on the Japanese Yen/Dollar (/$)


Use the following spot and forward bid-ask rates for the Japanese yen/U.S. dollar (/$) exchange rate from October 26, 2007, to
answer the following questions
a) Calculate the mid-rates from the bid-ask rate quotes.
b) Calculate the forward premium on the different maturities using the mid-rates from part a).

Period
spot
1 month
2 months
3 months
6 months
12 months
24 months

Days Forward
30
60
90
180
360
720

/$
Bid Rate
114.23
113.82
113.49
113.05
112.05
110.20
106.83

/$
Ask Rate
114.27
113.87
113.52
113.11
112.11
110.27
106.98

c) Which maturities have the smallest and largest forward premiums?

a)
Calculated
Mid-Rate

b)
Forward
Premium

Problem 5.5 Bloomberg Currency Cross Rates


Use the following cross rate table from Bloomberg to answer the following questions. If you are not familiar with all of the 3-letter currency
codes, refer to the table inside the back cover of this text.
Currency
HKD
AUD
CAD
CHF
GBP
JPY
EUR
USD

USD
7.7508
1.0903
0.9626
1.1644
0.4873
114.156
0.6952

EUR
11.1496
1.5684
1.3847
1.675
0.701
164.2134
1.4385

JPY
0.0679
0.0096
0.0084
0.0102
0.0043
0.0061
0.0088

GBP
15.9061
2.2375
1.9754
2.3896
234.2687
1.4266
2.0522

http://www.bloomberg.com/markets/currencies/fxc.html. Accessed October 26, 2007.


Quote
a. Japanese yen per US dollar?
b. US dollars per Japanese yen?
c. US dollars per euro?
d. Euros per US dollar?
e. Japanese yen per euro?
f. Euros per Japanese yen?
g. Canadian dollars per US dollar?
h. US dollars per Canadian dollar?
i. Australian dollars per US dollar?
j. US dollars per Australian dollar?
k. British pounds per US dollar?
l. US dollars per British pound?
m. US dollars per Swiss franc?
n. Swiss francs per US dollar?

Calculated

CHF
6.6564
0.9364
0.8267
0.4185
98.0368
0.597
0.8588

CAD
8.052
1.1327
1.2097
0.5062
118.5913
0.7222
1.0389

AUD
7.1088
0.8829
1.068
0.4469
104.7005
0.6376
0.9172

HKD
0.1407
0.1242
0.1502
0.0629
14.7282
0.0897
0.129

Problem 5.6 Forward Premiums on the Dollar/Euro ($/)


Use the following spot and forward bid-ask rates for the U.S. dollar/euro (US$/) exchange rate from July 5, 2005, to answer
the following questions
a) Calculate the mid-rates from the bid-ask rate quotes.
b) Calculate the forward premium on the different maturities using the mid-rates from part a).

Period
spot
1 month
2 months
3 months
6 months
12 months
24 months

Days Forward
30
60
90
180
360
720

US$/
Bid Rate
1.4389
1.4440
1.4400
1.4403
1.4407
1.4408
1.4417

US$/
Ask Rate
1.4403
1.4410
1.4415
1.4418
1.4422
1.4424
1.4436

c) Which maturities have the smallest and largest forward premiums?

a)
Calculated
Mid-Rate

b)
Forward
Premium

Problem 5.7 Riskless Profit on the Franc


Riskless profit on the Swiss franc. The following exchange rates are available to you.
(You can buy or sell at the stated rates.)
Assumptions
Beginning funds in Swiss francs (SF)
Mt. Fuji Bank (yen/$)
Mt. Rushmore Bank (SF/$)
Matterhorn Bank (yen/SF)
Try Number 1: Start with SF to $
Step 1: SF to $
Step 2: $ to yen
Step 3: yen to SF
Profit?

Try Number 2: Start with SF to yen


Step 1: SF to yen
Step 2: yen to $
Step 3: $ to SF
Profit?

Values
10,000,000.00
120.00
1.6000
80.00

Problem 5.8 Forward Premiums on the Australian Dollar


Use the following spot and forward bid-ask rates for the U.S. dollar/Australian dollar (US$/A$) exchange rate from October 26,
2007, to answer the following questions
a) Calculate the mid-rates from the bid-ask rate quotes.
b) Calculate the forward premium on the different maturities using the mid-rates from part a).
Since the exchange rate quotes are direct quotes on the dollar (US$/A$), the proper forward premium calculation is:
Forward premium = ( Forward - Spot ) / (Spot) x (360 / days)

Period
spot
1 month
2 months
3 months
6 months
12 months
24 months

Days Forward
30
60
90
180
360
720

US$/A$
Bid Rate
0.91630
0.91477
0.91313
0.91156
0.90542
0.89155
0.86488

US$/A$
Ask Rate
0.91700
0.91551
0.91388
0.91233
0.90621
0.89242
0.86602

c) Which maturities have the smallest and largest forward premiums?

a)
Calculated
Mid-Rate

b)
Forward
Premium

Problem 5.9 Trans-Atlantic Arbitrage


Trans-Atlantic arbitrage. A corporate treasury with operations in New York
simultaneously calls Citibank in mid-town (New York City) and Barclays in London.
The two banks give the following quotes at the same time on the euro.
Assumptions
Beginning funds

Citibank NYC quotes:


Bid ($/)
Ask ($/)
Barclays London quotes:
Bid ($/)
Ask ($/)
Arbitrage Strategy #1
Initial investment
Buy euros from Barclays (at the ask rate)
Sell euros to Citibank (at the bid rate)
Arbitrage profit (loss)
Arbitrage Strategy #2
Initial investment
Buy euros from Citibank (at the ask rate)
Sell euros to Barclays (at the bid rate)
Arbitrage profit (loss)

Values
1,000,000.00

0.9650
0.9670
0.9640
0.9660

1,000,000.00

1,000,000.00

Problem 5.10 Victoria Exports


A Canadian exporter, Victoria Exports, will be receiving six payments of 10,000, ranging from now to 12 months in the future.
Since the company keeps cash balances in both Canadian dollars and U.S. dollars, it can choose which currency to change the euros
to at the end of the various periods. Which currency appears to offer the better rates in the forward market?

Period
spot
1 month
2 months
3 months
6 months
12 months

Period
spot
1 month
2 months
3 months
6 months
12 months

Days
Forward
30
60
90
180
360

Days
Forward
30
60
90
180
360

C$/euro
1.38390
1.38439
1.38444
1.38590
1.38750
1.39189

US$/euro
1.1914
1.1926
1.1941
1.1956
1.2013
1.2130

Forward Premium
on the C$/euro

C$ Proceeds of
10,000.00

Difference
Over Spot

US$ Proceeds of
10,000.00

Difference
Over Spot

0.425%
0.234%
0.578%
0.520%
0.577%

Forward Premium
on the US$/euro
1.209%
1.360%
1.410%
1.662%
1.813%

Problem 5.11 Venezuelan Bolivar (A)


The Venezuelan government officially floated the Venezuelan bolivar (Bs) in February of 2002.
Within weeks, its value had moved from the pre-float fix of BS778/$ to Bs1025/$.
Assumptions
Fixed rate of exchange, Bs/$
New freely floating rate (2 weeks later), Bs/$

a) Is this a devaluation or depreciation?


This is a case in which a government has changed its currency from a
governmentally determined fixed rate, to a regime in which the currency
is allowed to change in value based on supply and demand forces in the
market. As a result of the move, the currency's value in this case was a
"depreciation" against the U.S. dollar.

b) By what percentage did its value change?


Percentage devaluation is:

Values
778
1,025

Problem 5.12 Venezuelan Bolivar (B)

The Venezuelan political and economic crisis deepened in late 2002 and early 2003. On
January 1st, 2003, the bolivar was trading at Bs1400/$. By February 1st, its value had
fallen to Bs1950/$. Many currency analysts and forecasters were predicting that the
bolivar would fall an additional 40% from its February 1st value by early summer 2003.
Assumptions
Exchange rate, January 1, 2003 (Bs/$)
Exchange rate, February 1, 2003 (Bs/$)
Forecast fall in value from Feb 1 to early summer, 2003
a) What was the percentage change in January?

b) Forecast value for June 2003?


We are actually solving the equation for S2 (Bs/$)

Values
1,400
1,950
-40.0%

Problem 5.13 Indirect Quotation on the Dollar


Calculate the forward premium on the dollar (the dollar is the home currency) if the spot rate is 1.0200/$ and the 3-month
forward rate is 1.0300/$.

Assumptions
Days forward
European euro ( per $)

Quoted
Spot rate
1.0200

90-day
Forward rate
90
1.0300

Calculation formula for the indirect quote on the dollar:

Check calculation
One way to check percentage change calculations is to invert each of the currency
quotes (1/(/$)), and recalculate the quote using the direct quotation formula.
European euro ($ per )

$0.9804

$0.9709

Percent premium
or discount on euro

Problem 5.14 Direct Quotation on the Dollar


Calculate the forward discount on the dollar (the dollar is the home currency) if the spot rate is spot rate is $1.5500/ and
the 6-month forward rate is $1.5600/

Assumptions
Days forward
Exchange rate, US$/

Check calculation
Inverting the quotes (/US$)

Quoted
Spot rate
$

1.5500

0.6452

180-day
Forward rate
180
1.5600

0.6410

Percent premium
or discount

Problem 5.15 Mexican Peso - European Euro Cross Rates


Calculate the cross rate between the Mexican peso (Ps) and the euro ( ) from the
following two spot rates: Ps11.43/$; 0.6944/$.
Assumptions
Mexican peso, pesos/dollar (Ps/$)
European euro, euros/dollar (/$)
Calculated cross rate, pesos/euro

or equivalently, euros/peso (/Ps)

Exchange rate
11.43
0.6944

Problem 5.16 Around the Horn


Assume the following quotes, calculate how a market trader at Citibank with $1,000,000
can make an inter-market arbitrage profit.:
Assumptions
Citibank quote: US$/pound ($/)
National Westminster quote: euros/pound (/)
Deutschebank quote: US$/euro ($/)
Initial investment
Path #1: US$ to euros to pounds to US$
Start with US$
Convert to euros at Deutschebank quote
Convert euros to pounds at NatWest quote
Convert pounds to US$ at Citibank quote
Arbitrage gain (loss)
Path #2: US$ to pounds to euros to US$
Start with US$
Convert to pounds at Citibank quote
Convert pounds to euros at NatWest quote
Convert euros to US$ at Deutschebank quote
Arbitrage gain (loss)

Exchange rate
1.5400
1.6000
0.9700
1,000,000.00

1,000,000.00

1,000,000.00

Dresdner
Quote
/
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2

Quote
1.841
1.51
1.2223
1.5061768797

$ Gain
$ (269,674.09)
$ (203,280.83)
$ (136,887.56)
$ (70,494.30)
$ (4,101.03)
$ 62,292.23
$ 128,685.50
$ 195,078.76
$ 261,472.03
$ 327,865.29
###
###
###
###
###
###
###
###

Move
$ to
to
to $
$ Gain

$
$

1,000,000.00
543,183.05
820,206.41
1,002,538.29
2,538.29

Gain
100%
90%
80%
70%
60%
Gain

Bank
Barclays $/
Dresdner /
Citibank $/
Citi/Barc /

50%
40%
30%
20%
10%
0%
1.1

1.2

1.3

1.4

1.5

1.

Gain

1.4

1.5

1.6

1.7

1.8

1.9