MGCR 382 Lecture Notes - Lecture 6: Forward Exchange Rate, Arbitrage
13 Feb 2015
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Document Summary
Mgcr 382: international business - lecture 6: exchange rates. Spot exchange rate- exchange rates that are used when carrying out transactions with immediate delivery. Forward exchange rate- is when the present exchange rate is agreed upon for a future transaction. A forward exchange rate is purely done to decrease the amount of risk in a transaction. Disadvantages that may arise to the forward exchange rate: legally obligated to pay off the agreed upon terms to which external factors are non influential. Arbitrage: an opportunity to make riskless profits by exploiting price differences across international markets. 2point arbitrage: arbitrage that occurs in two different locations. 3 point arbitrage: arbitrage that occurs when there are three different locations used.
