Exchange Risk and Yield Differentials

Robert Z. Aliber

Chapter 3. in Exchange Risk and Corporate International Finance, 1978, pp 24-45 from Palgrave Macmillan

Abstract: Abstract Changes in exchange rates are inevitable in a world of more than one hundred national currencies. Investors may be able to advance their economic welfare by acquiring assets denominated in currencies they expect to appreciate and selling assets and issuing liabilities denominated in currencies they expect to depreciate. As investors revise their holdings of assets denominated in different currencies, exchange rates should change. At any moment individual investors must determine whether the anticipated changes in the exchange rates have been fully discounted in other economic variables, or whether there remains an unexploited profit opportunity.

Keywords: Exchange Rate; Interest Rate; Monetary Policy; Purchasing Power Parity; Spot Rate (search for similar items in EconPapers)
Date: 1978
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DOI: 10.1007/978-1-349-03362-1_3

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