公司财务讲义英文版(ppt-58页)课件

1、1CORPORATE FINANCELING-NAN OUYANGPROFESSOR OF FINANCEINSTITUTE OF CONTEMPORARY FINANCESHANGHAI JIAO TONG UNIVERSITY 2Valuing International Cash Flows M E ( Cj,t ) E ( Ej,t ) N j=1 PV = t=1 ( 1 + r )tE ( Cj,t ) = expected cash flows denominated in currency j to be received by parent in period t. E (

2、Ej,t ) = expected exchange rate at which currency j can be converted to RMB at the end of period t. r = weighted average cost of capital of parent. M = number of currencies. N = number of periods.3Regression Model and Expectation (1)Regression: measure relationships between variables when establishi

3、ng policies.EXPt = b0 + b1 USDt-1 + b2 GNPt-1 + + ut.EXPt = % change in China exports to the U.S. b0 = a constant. USD = % change in the value of U.S. dollar. b1 = regression coefficient measuring 1% change in USDt-1 will lead to x% change in EXPt. GNP = % change in the U.S. GNP. B2 = regression coe

4、fficient measuring 1% change in GNPt-1 will lead to x% change in EXPt. ut = an error term.4Regression Model and Expectation (2)If b0 = 0.002, b1= 0.08, b2 = 0.36, USD1-1 = 5%, GNP1-1 = -1%, if insert these figures into the regression model, EXP1 = 3.84%. It means that one year later China exports to

5、 the U.S. will increase 3.84%.5Equilibrium Spot Exchange Rate E ( RMB / $1 ) S E0 D Q0 Q of $When D for $ = S of $, Q0 = the equilibrium quantity of $, E0 = the equilibrium spot exchange rate. 6Price Elasticity of Demand and Future Spot Exchange RateE = ( Q / Q ) / ( P / P ). E = price elasticity of

6、 demand. Q = quantity of goods demanded. P = price. Q = change in Q demanded for a change in P ( P ). If E 1, total spending goes up when P declines. E for $ could have an impact on the future spot exchange rate of $ and RMB. 7Balance of Payments and Future Spot Exchange Rate (1)Credits ( $ inflows

7、) Debits ( $ outflows )a: Exports of civilian b: Imports of civilian goods goodsc: Military sales d: Military purchase abroad abroad Trade balance = a + c - ( b + d )8Balance of Payments and Future Spot Exchange Rate (2)e: Exports of service f: Imports of services (investment income (investment inco

8、me and fees earned, paid out, China foreign tourism in tourism abroad, China, etc.) etc.) g: Net unilateral transfers ( gifts )Current account balance = a + c + e - ( b + d + f + g )9Balance of Payments and Future Spot Exchange Rate (3)h: Foreign private i: China private investment in China investme

9、nt abroadj: Foreign official k: Chinese government lending in China lending abroadCapital account balance = h + j - ( i + k ) l: Net increase in China official reservesOfficial reserves balanceNote: Item h includes net errors and omissions. 10Balance of Payments and Future Spot Exchange Rate (4)If C

10、hina has a trade surplus against the U.S., the value of RMB will be higher than that of $, spot rate will change.11Inflation and Future Spot Exchange RateE ( RMB / $1 ) S E1 S E0 D D Q1 Q of $If IF in China that in the U.S., supply of $ will move from S to S because the Chinese are likely to decreas

11、e their purchases of U.S. imports. Meanwhile, demand for $ will move from D to D because the Americans are likely to substitute China imports for U.S. products. Thus, spot exchange rate will move from E0 to E1. 12Interest Rate and Future Spot Exchange RateAll other things being equal, when interest

12、rate in China is greater than that in the U.S., investors will switch from dollar to RMB to take advantage of the higher RMB interest rates. So, demand for $ and supply of $ will change, spot exchange rate will change.13National Income and Future Spot Exchange RateAn increase in China income will le

13、ad to more China imports from the U.S. as Chinese people spend some of income on U.S. products. This, however, would cause demand for $ and supply of $ to change and spot exchange rate to change.14Other Factors Affecting Future Spot Exchange RatePolitical and economic environment: if political and e

14、conomic environment in China is better than that in the U.S., the value of RMB will be higher than that of $, spot rate will change.Investments: if Americans invest in China, demand for $ and supply of $ will change, spot rate will change.15Depreciation Versus AppreciationSuppose that on July 19, 20

15、01, U.S. dollar devalued by 17% against RMB. If E0 = initial RMB value of one dollar and E1 = post-devaluation RMB value of one dollar, then we know that ( E1 - E0 ) / E0 = -17%. Solving for E1 in terms of E0 yields E1 = 83% E0. Thus, the appreciation of RMB against U.S. dollar = ( E0 - E1 ) / E1 =

16、( E0 - 83% E0 ) / ( 83% E0 ) = 20.48%. 16Reasons for Government InterventionReduce economic exposure a risk incurred by exchange rate fluctuations. Adjust imports and exports. If RMB appreciates, China will lose comparative advantage in price against the U.S., thus reduce exports.Eliminate the impac

17、t of exchange rate fluctuations on inflation at home.17Approach to Government InterventionE ( RMB / $1 ) S E1 S E0 D D Q2 Q1 Q3 Q of $To maintain E0 in the face of E1, either the American government or the Chinese government or both must sell ( Q3 - Q2 ) dollars to purchase ( Q3 - Q2 ) E0 RMB, there

18、by eliminating the demand for ( Q3 - Q2 ) dollars, and simultaneously eliminating the excess supply of ( Q3 Q2 ) E0 RMB. 18Terms to Keep Existing Exchange RateTerms = international reserve / balance-of-payments deficit.19Spot Quotations (1)Direct quotation: RMB / $1.Indirect quotation: $ / 1 RMB.Bid

19、 quote: buy quote. Ask quote: sell quote. 20Spot Quotations (2)Assume you have 10000 RMB. Also assume the Bank of Chinas bid rate for $1 is 8.4513 RMB and its ask rate is 8.4536 RMB. If you convert 10000 RMB into $, you get 10000 / 8.4536 = $1182.93. If you reconvert the $1182.93 back to RMB, you ge

20、t only 1182.93 8.4513 = 9997.30 (RMB). The bid / ask spread = 10000 - 9997.30 = 2.7 (RMB). Or, the bid / ask spread = ( 8.4536 - 8.4513 ) / 8.4536 = 0.03%.21Forward QuotationsOutright rate: actual rate. 90-day forward bid = 8.2142RMB / $1.Swap rate: a forward differential = discount from, or a premi

21、um on, spot rate. If spot rate = 8.1023-30 RMB / $1, 90-day forward rate = 26-22, 90-day forward bid has 8.1026 - 8.1023 = 0.0003 RMB premium, 90-day forward ask has 8.1030 - 8.1022 = 0.0008 RMB discount.22Forward Rate Premium or DiscountExchange for $1 RMB FP or FD Spot 8.4513 30-day forward 8.4511

22、 -0.03% 90-day forward 8.4526 0.06% 180-day forward 8.4618 0.01%FP = forward premium, FD = forward discount. FP or FD = ( forward - spot ) / spot ( 360 / days of forward ). 23Forward Rate Fluctuation and Cash FlowsCash flow $ depreciation $ appreciation S P S P Export sales I I or D D D or I Local s

23、ales D D or I I I or D Local expenses D D I I Import expenses I I or D D D or IS = subsidiary in the U.S. P = parent in China. I = increase. D = decrease.24Cross Exchange RateExchange rate of currency A to currency B = exchange rate of RMB to A / exchange rate of RMB to B. If the exchange rate of RM

24、B to U.S. $ = 8.2798 RMB / $ 1, the exchange rate of RMB to HK $ = 1.0627 RMB / HK$ 1, the exchange rate of U.S. $ to KH $ = 8.2798 / 1.0627 = 7.7913 (HK$s / U.S. $ 1).25Interest Rate Parity and Future Spot RateIRP: r = ( 1 + if ) ( 1 + p ) - 1. Where r = rate of return from interest arbitrage ( buy

25、 foreign currency with home currency, invest it on foreign deposit, convert interest back to home currency ). if = interest rate of foreign currency. P = forward premium or discount. Since r = ih ( interest rate of home currency ), p = ( 1 + ih ) / ( 1 + if ) - 1 ih - if. If 6-months iRMB = 5%, 6-mo

26、nths i$ = 6%, p -1%. Chinese investors will receive 1% less when selling $ 6-months from now than what they pay for $ at spot rate; and, ( ih - if ) will influence the future spot rate.26Purchasing Power Parity and Future Spot RatePPP: Pf ( 1 + If ) ( 1 + ef ) = Ph ( 1 + Ih ). Where Pf = price index

27、 of foreign country. If = inflation rate of foreign country. ef = % change in value of foreign currency. h = home country. Since Ph = Pf, ef = ( 1 + Ih ) / ( 1 + If ) - 1 Ih - If. If IRMB = 5%, I$ = 3%, e$ 2%. $ will appreciate by 2%. If IRMB = 4%, I$ = 7%, e$ -3%. $ will depreciate by 3%. Based on

28、the PPP, Sj,t+1 = Sj 1 + ( Ih - If ) . Sj,t+1 = new value of spot rate of a given currency. Sj = spot rate in equilibrium. Obviously, ( Ih - If ) could influence the future spot rate.27International Fisher Effect and Future Spot RateIFE: r = ( 1 + if ) ( 1 + ef ) - 1. Where r = the effective return

29、on the foreign deposit. Since r = ih, ef = ( 1 + ih ) / ( 1 + if ) - 1 ih - if.If one year iRMB = 11%, one year i$ = 12%, e$ -1%. This means that $ will depreciate by 1% in order to make i$ equal to 11%. This also means that ( ih - if ) will influence the future spot rate.28Regression and Future Spo

30、t rateVRMB = b0 + b1 INF + b2 INC + + . Where VRMB = quarterly % change in RMB value. INF = quarterly % change in inflation differential between China and the U.S. INC = quarterly % change in income growth differential between China and the U.S. b1 = 1% change in INF, VRMB will change by x%. b2 = 1%

31、 change in INC, VRMB will change by x%. = an error term. If recent INF = 4% and INC = 2%, if b0 = 0.002, b1 = 0.8 and b2 = 1, VRMB = 5.4%. This means that RMB should appreciate by 5.4%, other things held constant; and, the future spot rate should be adjusted.29Sensitivity Analysis and Future Spot Ra

32、teERt = b0 + b1 INTt + b2 INFt-1 + + . Where ERt = % change in exchange rate over t. INTt = real interest rate differential over t. INFt-1 = inflation differential in previous t. INT1 % change in ER1 P -3% 0.1% + (-0.7) (-3%) + 0.6 1% = 2.8% 20% -4% 0.1% + (-0.7) (-4%) + 0.6 1% = 3.5% 50% -5% 0.1% +

33、 (-0.7) (-5%) + 0.6 1% = 4.2% 30% Here b0 = 0.1%, b1 = -0.7, b2 = 0.6, INF1-1 of RMB and $ = 1%. One year hence, The weighted average appreciation of $ = 3.6%. This, however, will influence the future spot rate.30Market Expectation and Future Spot RateAssume that the 30-day forward rate = $ 0.12 / 1

34、 RMB and the general expectation of speculators for the future spot rate in 30 days = $ 0.17 / 1 RMB. Thus, buying RMB 30 days forward at $ 0.12 / 1 RMB and selling them when received in 30 days at $ 0.17 / 1 RMB will earn $ 0.05 / 1 RMB. If a large number of speculators implement this strategy, the

35、 substantial demand to buy RMB forward will cause the forward rate of RMB and $ to increase until the speculative demand stops. 31Speculating on Anticipated Exchange Rates (1)Assume that the 30-day forward rate = $ 0.12 / 1 RMB and the general expectation for the future spot rate in 30 days = $ 0.17

36、 / 1 RMB. Thus, buying RMB 30 days forward at $ 0.12 / 1 RMB and selling them when received in 30 days at $ 0.17 / 1 RMB will earn $ 0.05 / 1 RMB. If a large number of speculators implement this strategy, the substantial demand to buy RMB forward will cause the forward rate of RMB and $ to increase

37、until the speculative demand stops. 32Speculating on Anticipated Exchange Rates (2)Assume $ will appreciate from 8.2714 RMB / $ 1 to 8.3714 RMB / $ 1 in 30 days. Also assume short-term annual interest rates in inter-bank market are:Currency Lending rate Borrowing rate RMB 6.72% 7.20% $ 6.48% 6.96%Yo

38、u borrow 20 million RMB for instance. Convert them to 20 / 8.2714 = $ 2.418 million. Lend the $ for 30 days. You receive 2.418 1 + 6.48% ( 30 / 360 ) = $ 2.431 million. Convert the $ to 2.431 8.3714 = 20.351 million RMB. You earn a profit of 20.351 - 20 1 + 7.20% ( 30 / 360 ) = 0.231 million RMB.33S

39、peculating on Anticipated Exchange Rates (3)Assume $ will depreciate from 8.2714 RMB / $ 1 to 8.1714 RMB / $ 1 in 30 days. Also assume short-term annual interest rates in inter-bank market are:Currency Lending rate Borrowing rate RMB 6.72% 7.20% $ 6.48% 6.96%You borrow $ 2.418 million for instance.

40、Convert them to 2.418 8.2714 = 20 million RMB. Lend the RMB for 30 days. You receive 20 1 + 6.72% ( 30 / 360 ) = 20.112 million RMB. Convert the RMB to 20.112 / 8.1714 = $ 2.461 million. You earn a profit of 2.461 - 2.418 1 + 6.96% ( 30 / 360 ) = $ 0.029 million which is equal to 0.029 8.1714 = 0.23

41、7 million RMB.34Speculating with Currency FuturesCurrency futures: a contract entitled a specified amount of a specified currency for a stated price on a specified date. If $ will appreciate, you purchase a future contract. On the settlement date, you purchase $ at the specified rate and then sell t

42、hem at the appreciated rate to make profit. If $ will depreciate, you sell a future contract. On the settlement date, you buy $ at the depreciated rate and then sell them at the specified rate to make profit.35Speculating with Currency Call OptionCurrency call option: a right to buy a specified amou

43、nt of a particular currency at a specified price within a given t. To speculate, you can purchase $ call options. Once $ appreciates, you exercise call option by purchasing $ at the strike price and then sell them at the appreciated rate to make profit. Once the $ depreciates, you give up call optio

44、n.36Speculating with Currency Put OptionCurrency put option: a right to sell a specified amount of a particular currency at a specified price within a given t. To speculate, you can purchase $ put options. Once $ appreciates, you give up put option. Once $ depreciates, you purchase $ at the deprecia

45、ted rate and then exercise put option by selling $ at the strike price to make profit.37Locational Arbitrage Bank A Bank B Bid Ask Bid Ask RMB / $ 1 8.2614 8.2714 8.2718 8.2723Assume you start with 100 million RMB. If you buy $ from Bank A at the ask price and then sell them to Bank B at the bid pri

46、ce, you gain ( 100 / 8.2714 ) 8.2718 - 100 = 0.005 million RMB. However, the law of market would make Bank As ask price equal to Bank Bs bid price in the end. 38Triangular Arbitrage Quoted Bid Quoted Ask RMB / $ 1 8.2714 8.2814 RMB / 1 12.6212 12.6312 / $ 1 0.66 0.66 / $ 1* 0.76* 0.86* / $ 1 = ( RMB

47、 / $ 1) ( RMB / 1) = calculated cross exchange rate. / $ 1* = quoted cross exchange rate. Assume you start with 100 million RMB. If you purchase 100 / 8.2714 = $ 12.09 million, convert them to 12.09 0.76 = 9.19 million, and then exchange the for 9.19 12.6212 = 115.99 million RMB, you gain 115.99 - 1

48、00 = 15.99 million RMB. 39Covered interest ArbitrageAssume you start with 8 million RMB. Also assume spot rate = 8.2741 RMB / $1, 90-day forward rate = 8.2714 RMB / $1, 90-day interest rate on RMB = 2%, and 90-day interest rate on $ = 4%. To have an arbitrage, you covert RMB to 8 / 8.2741 = $ 0.967

49、million, deposit them in an American Bank, and then set up a forward contract to sell them simultaneously. By the time the deposit matures, you gain 0.967 ( 1 + 4% ) 8.2714 - 8 = 0.318 million RMB.40Transaction Exposure and Invoice PolicyTransaction exposure: a degree to which the value of future ca

50、sh transactions can be affected by exchange rate fluctuations.Assume an American exporter sends goods invoiced in $ to a Chinese firm. Also assume the Chinese firm exports products invoiced in $ to other corporations in the U.S. The $ receivables from the Chinese firms exports can be used to pay off

51、 its future payables in $. This, therefore, reduces transaction exposure. 41Transaction Exposure and Future Contract HedgeTo hedge RMB value on future payables in $, buy a contract and lock in the amount of RMB.To hedge RMB value of future receivables in $, sell a contract and lock in the amount of

52、RMB. 42Transaction Exposure and Forward Contract HedgeIf you pay $ in 30 days, you can buy from a bank a forward contract to lock in the 30-day forward rate. If you expect receivables in $ in 30 days, you can sell a forward contract to lock in the 30-day forward rate.43Transaction Exposure and Non-d

53、eliverable Forward Contract HedgeNon-deliverable Forward Contract: a forward contract without actual exchange of currencies.Assume you will need $ 100 million in 90 days. Also assume you buy $ 100 million on July 1.If spot rate = 8.2714 RMB / $ 1, RMB position = 100 8.2714 = 827.14 million. If rate

54、by July 1 = 8.3714 RMB / $ 1, RMB position = 100 8.3714 = 837.14 million, you will receive 837.14 - 827.14 = 10 million RMB from the bank. If rate by July 1 = 8.1714 RMB / $ 1, RMB position = 100 8.1714 = 817.14 million, you will owe the bank 827.14 - 817.14 = 10 million RMB. Non-deliverable Forward

55、 Contract hedges exchange risk.44Transaction Exposure and Money Market Hedge on PayablesTake a money market position to cover a future payables position. If you pay $ 1 million in 30 days, if the annual interest rate of $ is 5%, you need 1000000 / 1 + ( 6% / 12 ) = $ 995025 to hedge the payables. An

56、d, if the spot rate is 8.2714 RMB / $ 1, you need 995025 8.2714 = 8230250 ( RMB ) to purchase $ 995025 and invest them. When they mature in 30 days, you will be able to cover the payables regardless of how exchange rate changes over 30 days.45Transaction Exposure and Money Market Hedge on Receivable

57、sTake a money market position to cover a future receivables position. If you receive $ 400000 in 90 days, if the annual interest rate of $ is 8%, you need 400000 / 1 + ( 8% / 4 ) = $ 392157 to hedge the receivables. And, if you borrow $ 392157 and convert them into RMB and invest the RMB, then use r

58、eceivables to pay off the loan in 90 days, you can not only earn profit on RMB investment, but also get rid of transaction exposure. 46Hedging Payables with Currency Call OptionAssume you will pay $ 10000 in 90 days. Also assume there is a call option with an exercise price of 8.3114 RMB for $ 1. If

59、, however, premium paid on each call option = 0.32 RMB, spot rate in 90 days = 8.2714 RMB / $ 1, you need ( 0.32 + 8.3114 ) 10000 = 86314 ( RMB ) to hedge $ 10000 payables. But, you will not exercise the call option because you can purchase the $ 10000 at 8.2714 RMB for $ 1 in the spot market. 47Hed

60、ging Receivables with Currency Put OptionAssume you receive $ 60000 in 90 days. Also assume there is a put option with an exercise price of $1 for 8.3114 RMB. If, however, premium on each put option = 0.24 RMB, spot rate in 90 days = 8.2714 RMB / $ 1, you will receive ( 8.3114 - 0.24 ) 60000 = 48428