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					FRL 453 Multinational Financial Management Formula Sheet

(X-M) + (CI-CO) +(FI-FO) + FXB = BOP
n  E (CF$,t )  V = ∑ t  t =1  (1 + k ) 

E (CF$,t ) = ∑ [ E (CF j ,t ) × E ( ER j ,t )]
j =1

m

 m  [ E (CF j ,t ) × E ( ER j ,t )]  n ∑ j =1  V = ∑  (1 + k ) t t =1     

F − S * 360 * 100 f = S n
FC n

$ / FC1 Cross Exchange Rate = = FC2 / FC1 $ / FC2 Bid $ : FC1 Bid FC2 : FC1 = Ask $ : FC2 Ask $ : FC1 Ask FC2 : FC1 = Bid $ : FC2

Bid / Ask Spread =

Ask - Bid Ask

%∆S =

S t - S t −1 * 100 S t −1

(1 + ρ ) =

(1 + ih ) (1 + i f )

F = S (1 + ρ ) F −S ≅ ih − i f ρ= S

Note: Variable “S” represents direct quotation of exchange rate. The Textbook uses “e” instead of “S”, so “e” and “S” are interchangeable in the equations.
FC

P *S = P
$

PI S= PI

FC

$

St +1 (1 + π $ ) = St (1 + π FC )
S −S π −π = S (1 + π )
$

FC

t

t +1

FC

t +1

S -S = i -i (1 + i ) S
S FC t +1 t FC t

F = (1 + i ) (1 + i ) S
$ t,t +1 FC t

S −F F
t t ,t +1 t,t +1

t,t +1

i −i = (1 + i )
$ FC FC $ FC

i −i F −S = S (1 + i )
t FC t

i = r + Π + rΠ

i$ = r$ + Π$ ; iFC = rFC + ΠFC

E =
p

%∆ Q % ∆P
$

d

C E = E * C
$ R N

$

FC

Buyer of Call Option: Profit/Loss = Spot Rate – (Strike Price + Premium) Writer of Call Option: Profit/Loss = Premium –(Spot Rate –Strike Price) Buyer of Put Option: Profit/Loss = Strike Price – (Spot Rate + Premium) Writer of Put Option: Profit/Loss = Premium – (Strike Price – Spot Rate)

RCHp = NCHp - NCp RCHr = NRr - NRHr
Delta = ∆Premium ∆Spot Rate ∆Premium ∆time ∆Premium ∆volatility

Theta =

Lambda =

RHO =

∆Premium ∆US Dollar Interest Rate ∆Premium ∆Foreign Interest Rate

PHI =

(Size of Option)*(Premium)*(Spot Rate) = (Cost of Option) Net Exposed Assets = Exposed Assets – Exposed Liabilities
Exact Days 360

International : Principal * Interest Rate *

British : Principal * Interest Rate *

Exact Days 365

Swiss : Principal * Interest Rate *

Average 30 360

    X  Y  1 +  R0, x * 360  * (1 + R x , y ) = 1 +  R0, y * 360        Premium on Call Option using spot rate : C = e -rf T SN (d 1 ) − Ee − rd T N (d 2 )

σ2  S  T ln  +  rd − r f +  2  E   d1 = σ T
d 2 = d1 − σ T Premium of Call Option using Forward Rate : C = FN(d1 ) − EN (d 2) e rd T
2  F  σ ln  +   E  2 d1 = σ T

[

]

 T  

d 2 = d1 − σ T Premium of Put Option : P = [F(N(d1 ) − 1) − F(N(d 2 ) − 1)]e rd T

NPV = − IO + ∑
t =1

n

CFt SVn + t (1 + k ) (1 + k ) n

n  CFt  SVn =  IO − ∑ (1 + k ) n t  t =1 (1 + k )  


				
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