Session 12: Cracking the Currency Code!
ฝัง
- เผยแพร่เมื่อ 19 พ.ค. 2024
- (Note: Replacing an earlier version, with a correction on interest rate parity and some added detail)
In a world where investors and businesses are global, it is imperative that we be able to move across currencies easily. In this session, I argue that inflation is the key reason why currencies matter, and that differences in expected inflation across currencies explain differences in interest rates and why exchange rates change over time.
Slides: www.stern.nyu.edu/~adamodar/pd...
Post class test: www.stern.nyu.edu/~adamodar/pd...
Post class test solution: www.stern.nyu.edu/~adamodar/pd...
Thank you for democratizing education!
I've been grappling with this topic as I'm analyzing cross-country investments, and tte decision to invest hinges on both the judgment on the company and the judgment on the currency.
This session really helped.
Thank you, Prof. Damodaran!
Awesome video / session as always! Thank you Prof. Damodaran!
I always wait for your updates. :)
Great session! Thank you for this. 2 questions about inflation expectations approach: (1) If mistakes will cancel each other out, why not instead just project future cash flows in USD assuming exchange rate will remain unchanged? (2) How accurate were past projections of FX rates based on inflation differences? Worried that the approach makes great logical sense, may hold over 10+ year horizons but not hold over 3-5 years. Thanks again, Professor.
Thank you for this foundations course. It really helped a lot.
Professor, thank you for the breakdown! Very informative, quick question if a company is operating in multiple locations and has teams, PPE, and other assets in those countries. How does one evaluate the business venture?
Thank you so much Prof. Damodaran!!
Thank you very ,uch for the course on foundations of finance . I appreciate this a lot
The problem with inflation parity is in high inflation countries, where this usually impacts relative prices of goods. In such environments, growth rates not necessarily are equal to inflation (it will depend on bargain power, according to secto/competitive positioning).
I am addicted to your lectures😅 i don't know if you will ever read this sir, but you have inspired me to be a better teacher.
I remember you had told, no matter where you would have been, you would still be a teacher.
I have to watch this video twice or may be thrice, cause I didn't understand properly
Professor Damodaran = 🤴
Thank You Professor.
Anyone know if this is the final session in the foundations of finance course, or are there more sessions to come?
Nice video on forex😎👍
theoretically emerging markets provided some of the highest interests rates if you are a lender/investor, however their also-high inflation means your interest income is losing value then add on to that the consequential depreciation of their currencies. So on a net basis, its terrible for investment/lending. I don't know how much currency hedging will help.
Great vid
Can someone explain why the US interest rate is in the denominator in the question #2 equation, and the US inflation rate is in the denominator in question #4? This seems to be inconsistent with the formula in the slides. What am I missing?
I am not getting much at mid but keep watching and click the whole in last minutes.
currency is like a unit,like meter, centimeter, kg and gram. it will not change value... the nominal cash flow growth rate will change accordingly as switching the currency.
I am your great admirer. I have watched most of your videos on valuation . I teach both valuation and forex in indian Universities and CA Final students
Why can't countries just print money recklessly - their inflation downside should be bounded by the purchasing power parity which would cause the exchange rates to make up for the extra printing of money
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