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Explain in general terms how various forms of arbitrage can remove any discrepancies in the pricing of currencies
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- Explain using illustrations, how various forms of arbitrage can remove any discrepancies in pricing of currencies.Explain in general terms how various forms of arbitrage can remove any discrepancies in the pricing of currencies. Explain the concept of locational arbitrage and the scenario necessary for it to be plausible.Explain how various forms of aribtrage can remove discrepancies in the pricing of currencies
- Explain this function of BSP -Liquidity management -determination of exchange rate policy -lender of last resort -Currency IssueShow the different arguments put forward by the proponents and opponents of currency hedging?Explain why the following statement is true or false: “The smaller and less liquid markets and currency markets frequently demonstrate behaviors that follow the principles outlined by the different schools of thought on exchange rate determination (parity conditions, balance of payments approach, and asset approach) relatively well in the medium to long term.”
- In the Mundell-Fleming model with floating, exchange rates, explain what happens to aggregate income, the exchange rate, and the trade balance when the money supply is reduced. What would happen if exchange rates were fixed rather than floating?Which of the following is not an argument for central bank intervention? Exchange rates are highly volatile. Exchange rate fluctuations have an adverse effect on the macroeconomy. The market knows better than economic policy makers what the appropriate level of the exchange rate is. Central bank intervention can smooth out fluctuations in exchange rates.Explain the following: Liquidity management currency issue lender of last resort financial supervision Management of foreign currency reserves Determination of exchange rate policy