StudentShare solutions
Triangle menu

Topics in International Business Finance Quantitative and Qualitative Analysis - Research Proposal Example

Not dowloaded yet

Extract of sample
Topics in International Business Finance Quantitative and Qualitative Analysis

Also, the degree of real interest rate parity depends on the scope of
uncovered interest parity and relative purchasing power parity. Actually, uncovered interest parity denotes financial investment between money and foreign exchange markets. The relative purchasing power parity means investment in goods and services. Thus the real interest parity condition embraces components of both real and financial integration.
According to Roll (1979), under the efficient market assumption, ex ante deviations from purchasing power parity are unpredictable. (Frankel, 1991), for instance, proposes that breach of ex ante relative purchasing power parity is linked with uncompleted combination of goods markets.
capital is open to shift. For example, an optimal firm fixes its marginal product of capital equal to the consumer cost of capital. The consumer cost of capital is nominal interest rate (without considering taxes and depreciation) attuned to the rate of inflation of its output. Thus the real interest parity is a signal to the equalization of the marginal product of capital. A refinement is drawn in using parity conditions to assess integration. That is, if a parity condition is discarded, then expansions and reductions of differences may happen as a result of either more economic integration or greater union of economic policies, or both.
differentials and the coefficient figures are applied to evalua...
Real Interest Parity
Regression modes are applied to decide the strength of real interest parity (Cumby and Obsfeld, 1984). For instance, interest rate derivatives are returned on inflation
differentials and the coefficient figures are applied to evaluate whether the real interest rate parity condition holds. There is an extensive literature on testing real interest parity according to (Mishkin (1984), Mark (1985), and Cumby and Mishkin (1986)).
Interest Rate Parity (IRP)
Example: U.S. investor has $1 to invest, say for one year. Here, two strategies are to be considered: 1) Investment in U.S. treasury securities at i$, at domestic interest rate, or 2) Invest U.K. treasury securities at i, and hedge FX risk by selling maturity value of s forward one year.
In U.S., the maturity value in one year will be: $1(1 + i$)
In U.K., the investment strategy will be:
4
1. Sell $1 for s to get $1 S($/) pounds. (assumption that S = S($/)).
2. Invest s at U.K. int. rate ( i) with payoff = $1/S x (1 + i )
3. Sell s forward at F360 ($/) for the maturity value of the UK investment, to get a guaranteed amount of $s.
The IRP condition for the above example will be:
(1 + i$) = (F / S) (1 + i)
Limitation of Interest Rate Parity:
Even though Interest Rate Parity (IRP) hold most of the time, but still IRP does not always hold exactly as it has to be. IRP depends on:
Transaction costs: The borrowing and lending interest rate cannot be assumed to be the same. Interest rates are normally higher for borrowing than for lending. Therefore, higher interest rates for borrowing may do away with or surpass any possible arbitrage profits.
Also, there are transaction costs like commissions, ...Show more

Summary

The spotlight of this research is to observe real interest parity, uncovered interest parity, and purchasing power parity. The three parity terms describe the crucial links between markets and they are considered to be the cornerstones of representation in international finance…
Author : marlinschroeder
Topics in International Business Finance Quantitative and Qualitative Analysis essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the research proposal on your topic
"Topics in International Business Finance Quantitative and Qualitative Analysis"
with a personal 20% discount.
Grab the best paper

Related Essays

Management Dissertation Proposal Proforma
Your eCampus email address: shaimaa.alfoudari@my.ohecampus.com DISSERTATION ADVISOR (and eCampus email): Dr. Rachel Anderson eCampus email: Rachel.anderson@my.ohecampus.com GDI (and eCampus email): Michail Koubouros eCampus email: Michail.koubouros.my.ohecampus.com Faculty Manager (and eCampus email): Will be provided by the DA / GDI to the student PROPOSED DISSERTATION TITLE: : Integration of The Kuwait Stock Market into the Global Market : Problems, Challenges and opportunities: An Empirical analysis" ETHICAL CHECKLIST COMPLETED (yes or no)?
6 pages (1500 words) Research Proposal
Business Finance Accounting
The investment analysis consists of evaluation of the profitability of a chosen company of the industry. The feasibility of investing to the industry and the returns of the outlay to the prospect investors will be carefully analyzed; the valuation of its stocks, the policy on dividends and the equity of the shareholders.
4 pages (1000 words) Research Proposal
Finance Analysis: SABMiller
The researcher states that SABMiller beer has been in the beer and softdrinks businesss for many years. The succeeding paragraphs of this research proposal show how good SABMiller is in acquiring and managing its long term debts and also how it has acquired additional funds from the stock exchange's offering of its stock.
7 pages (1750 words) Research Proposal
Business/Finance (islamic Finance)
Last ten years have witnessed a phenomenal growth rate in Islamic financial institutions' performance. As per the recent statistics provided by The International Islamic Finance Forum (2007), there are 270 Islamic banks worldwide having $265 billion assets, financial investments of around $400 billion, and deposits of $202 billion.
4 pages (1000 words) Research Proposal
Determining the Impact of Information Systems
The growing dependency on IT systems by political organizations will also be studied along with its practical applications in day to running as well as in certain special occasions like elections. Today’s
4 pages (1000 words) Research Proposal
Topics in the area of international management, marketing international strategic decision-making
Such values are eventually transferred by seniors in the organizations to new employees and thus have a conclusive say in organizations’ international strategic decision-making. An outsider’s perceptions pertaining to any particular organization are often
6 pages (1500 words) Research Proposal
Business research project proposal--Irish Guinness Beer
In fact, just like any other companies which are also successful, Guinness surely has important formula on how it was able to obtain its status today. It gained so
10 pages (2500 words) Research Proposal
Analysis of Current Issues in Finance Coursework: Research Portfolio
Corporate governance has been identified as a very useful system by which banks in the UK can be regulated in the conduct of their business to ensure that they all follow a set of accepted and approved paradigm of operations that is acceptable by
4 pages (1000 words) Research Proposal
International Business Strategies A research paper on international business strategies would allow you to carry out detailed research on international market size, access strategies, market share and analysis, international business laws, regulations and
Such companies were essentially large business houses or multinational corporations which enjoy a monopoly over their business. Globalisation has been pushed up by the rise in the number of firms which have been confronted with valid reasons
9 pages (2250 words) Research Proposal
The Rule of Change in Project Management: Drivers and Resistance in Saudi Arabia
A study by Anstey (2006) noted that, nowadays businesses face the challenge of increased level of change and the degree of complexity. Some leaders find a challenge of bringing in the required motivation for ensuring the employees adopt change without resistance. It takes
16 pages (4000 words) Research Proposal
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation