The following points highlight the top four theories of exchange rates. The theories are: 1. Purchasing Power Parity Theory (PPP) 2. Interest Rate Parity Theory (IRP) 3. International Fisher Effect (IFE) Theory 4. Unbiased Forward Rate Theory (UFR). 1. Purchasing Power Parity Theory (PPP): The PPP theory applies to commodities. There are two variants of the PPP: the absolute PPP [...]
There are three broad exchange rate systems—currency board, fixed exchange rate and floating rate exchange rate. A fourth can be added when a country does not have its own currency and merely adopts another country's currency. The fixed exchange rate has three variants and the floating exchange rate has two variants. 1. Fixed (or Pegged) Exchange Rate: This consists of [...]
Financial instruments mean documents that evidence the claims and income or asset as "any contract that gives rise to both a financial asset on one enterprise and a financial liability or equity instrument of another enterprise". 1. Securities: 'Securities' is a general term for a stock exchange investment. Securities Contract (Regulation) Act, 1956 defines securities as to include: 1. Shares, [...]