- This topic has 3 replies, 2 voices, and was last updated 10 years ago by
.
Viewing 4 posts - 1 through 4 (of 4 total)
- Posts
Hello John
I noticed that in this question both the inflation rates and interest rates were given, You mentioned that when asked to find the forward exchange rate, the interest rates should be used in the calculation. My question is, in what situation would the inflation rates be used ? In chapter 22 of the OT notes, examples 1 & 2, I noticed that the inflation rates were used to find exchange rates in the future.
It is interest rates always that determine the forward rates.
If however you are asked to forecast a future spot rate, then we use inflation rates.
(Chapter 22 is dealing with forecasting future spot rates, not with forward rates)
Viewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.