Foreign Exchange Markets

Foreign Exchange Markets - Foreign Exchange Markets From...

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Foreign Exchange Markets From Last Time Dumping is when a company directly sells at a cheaper price in a foreign land. Is that reverse arbitrage? Dumping is a form of price discrimination. To successfully engage in price discrimination you must be able to prevent resale of your product, in other words, you must prevent arbitrage from occurring. Are the activities of a middleman arbitrage? To be technical about it, yes. When investing in a foreign bonds, could you make a large profit from investing in a country that has a rapidly expanding economy? A rapidly expanding economy may face a savings shortage, so interest rates there may be higher. Why would anybody invest in U.S. bonds if you can get a better return somewhere else in the world? That is exactly what interest rate arbitrage argues. Assets which have identical risk, taxation, and liquidity characteristics ought to have the same return. The U.S. bond and the German bond should have the same return. return on U.S. bond = return on German bond
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This note was uploaded on 11/22/2011 for the course FIN FIN1100 taught by Professor Bradrifkin during the Fall '09 term at Broward College.

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Foreign Exchange Markets - Foreign Exchange Markets From...

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