Exam 7: Speculation and Risk in the Foreign Exchange Market

Which one of the following would be an answer to why the forward exchange rate is an unbiased predictor of the future spot rate?

Which one of the following is the only determinant of volatility in the forward currency markets?

The peso problem got its name during the period 1955-1976 when the ________ authorities were attempting to peg the peso-dollar exchange rate.

If you were attempting to forecast the forward exchange rate for a particular horizon such as 90 days,how would the forward exchange rate be an unbiased predictor of the future spot exchange rate?

The risk that is associated with an asset's return arising from the covariance of the return with the return on a large,well-diversified portfolio is known as ________ risk.

What concept states that there is no systematic difference between the forward rate and the expected future spot rate,and that the expected forward market return is zero?

If investors ________,we would assume that do not make systematic mistakes when forecasting exchange rates.

What problem occurred as the result of a monetary stabilization plan consisting of tiding two currencies to the same exchange rate?

The ________ on an asset is the expected return on the asset in excess of the return on a risk-free asset.

What is the prediction of the CAPM for the relationship between the forward exchange rate and the expected future spot exchange rate?

What does the "carry trade" term mean?

Regression tests of the unbiasedness hypothesis indicate that it is ________ with real life events.

What is the name given to the risk associated with an asset's return arising from the covariance of the return on a large,well-diversified portfolio?

To construct the uncertain yen-denominated return from investing one yen in the Swiss franc,what is your first step?

A phenomenon known as ________ arises when rational investors anticipate events that do not with the frequency that the investors expect.

Which one of the following would some say invalidates the unbiasedness hypothesis?

Because systematic risk measures how much an asset's return co-moves with the market,it ________.

If market efficiency is identified with parity,currency markets that are ________ provide no opportunities for currency traders to earn profits.

It is often argued that forward exchange rates should be unbiased predictors of future spot exchange rates.When the foreign exchange market is efficient,forward rates are not able to be an unbiased predictor.Is this true or false?

Which one of the following is NOT a drawback when economists use survey data to examine the unbiasedness hypothesis?