Features and Investment Characteristics of Raw Land, Timberland, and Farmland
Natural resources are essential production inputs that play a crucial role in the economy and daily life. These resources can be categorized into three main types: Plants and animals are also known as soft commodities (grown over a period of time)….
Arbitrage Relationship between Spot and Forward Exchange Rates
This section will consider the relationships between spot and forward rates, interest rates, and maturities that exist as a result of arbitrage relationships. Spot and Forward Rates In the professional FX market, forward exchange rates are commonly quoted in terms…
Capital Restrictions
Capital restrictions are the measures that governments or central banks take to control the flow of foreign money in and out of a country’s economy. Objectives of Capital Restrictions Economic Stability and Growth Governments impose capital restrictions to steer their…
Exchange Rate Regimes
An exchange rate regime is the framework a country’s central bank or government employs to determine its currency’s relative value in the international market. This regime influences the country’s trading relationships and capital flows. The chosen regime is based on…
Foreign Exchange Market
The foreign exchange (FX) market is the world’s largest market, with a daily turnover of approximately USD 6.6 trillion in 2019. It operates 24 hours daily, facilitating international trade and cross-border capital flows with participants from various backgrounds. Functions of…
Cost-push and Demand-pull Inflation
Cost-push Inflation Aggregate supply is the total amount of goods and services produced by an economy at a given price level. Cost-push inflation is attributed to a reduction in the aggregate supply caused by a rise in the cost of…
Cross Rates
It is possible to back out cross rates given two exchange rates involving three currencies. Consider a foreign exchange market with the exchange rate between the Chinese Yuan and the South African rand (ZAR/CNY). This market can also quote the…
Covariance and Correlation
Covariance Covariance is a measure of how two variables move together. The sample covariance of X and Y is calculated as follows: $${s}_{XY}=\frac{\sum_{i=1}^{N}\left(X_i-\bar{X}\right)\left(Y_i-\bar{Y}\right)}{n-1}$$ The formula above implies that the sample covariance is the mean of the product of the deviations in the two random variables and…
Measures of the Shape of a Distribution
Since the deviations from the mean are squared when calculating variance, we cannot determine whether significant deviations are more likely to be positive or negative. In order to identify other crucial distributional traits, we must look beyond measures of central…
Measures of Dispersion
Measures of dispersion are used to describe the variability or spread in a sample or population. They are usually used in conjunction with measures of central tendency, such as the mean and the median. Specifically, measures of dispersion are the…
