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PGBM144: With a close reference to the recent movements in Pound /Dollar spot exchange rate, critically discuss main causes of exchange rate volatility in the foreign exchange markets: International Financial Markets and Econometrics Assignment, UOS, UK
University | University of Sunderland (UOS) |
Subject | PGBM144: International Financial Markets and Econometrics |
Question 1:
a) With a close reference to the recent movements in Pound /Dollar spot exchange rate, critically discuss main causes of exchange rate volatility in the foreign exchange markets.
b) How might exchange rate volatility impact international trade? (Use relevant financial data and charts to illustrate your answer).
Question 2:
a) Explain the nature and categories of currency exposures face by individuals and firms in international business and international financial transactions. Critically discuss how multinational firms and international traders might mitigate such currency exposures through derivative markets tools.
b) Describe how ‘cross hedging’ and ‘currency diversification’ work in reducing exposures and risks in international financial transactions.
c) Critically examine why a firm involved in international financial transactions should consider hedging net payables (or net receivables) with currency option contracts rather than (i) forward contracts, (ii) future contracts, and (iii) swap contracts.
Question 3:
Critically examine how recent interest rate policy and quantitative easing operations via short term international money markets have impacted international capital markets and stock prices.
Question 4:
a) With a close reference to the efficient market hypothesis literature, carry out your own financial econometrics investigation to critically examine the level of informational efficiency of the London Stock Exchange (LSE) market. (Your answer should be based on your own results obtained from applying financial econometrics methods and software and a dataset on overall share price index and at least 3 companies quoted in the LSE market).
b) Critically discuss the implications of your empirical investigation for the financial markets