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 )