Analyze how and why government might intervene in foreign exchange market.
Supposing no government intervention, critically describe how differences in inflation rate and interest rates between countries might describe the dynamics in exchange rate. Make employ of suitable exs and diagrams.
With the assist of illustrative and numerical instances differentiate between sophisticated and unsophisticated speculation in context of foreign exchange.
Illustrate out the concept of triangular Parity and Covered Interest Rate Parity and using illustrations, describe triangular and covered interest rate arbitrage. Why is arbitraging short lived?
Make a distinction carefully with illustrative illustrations between transaction and translation risks.
Compare the management of transaction risk using a forward and a future contract. What are options contracts?