Expectations theory: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson m (Add category.) |
imported>Doug Williamson (Add links.) |
||
| Line 8: | Line 8: | ||
== See also == | == See also == | ||
* [[Carry trade]] | |||
* [[Fisher Effect]] | |||
* [[Four way equivalence model]] | * [[Four way equivalence model]] | ||
* [[Interest rate parity]] | |||
* [[International Fisher Effect]] | |||
* [[Outturn]] | * [[Outturn]] | ||
* [[Purchasing power parity]] | |||
* [[Rational expectations]] | * [[Rational expectations]] | ||
* [[Yield curve]] | * [[Yield curve]] | ||
Revision as of 21:36, 10 October 2020
Expectations theory states that the best measure of the market's average expectation of the outturn spot foreign exchange rate at a given future date is the current market forward rate for the same maturity.
Expectations theory also applies in the interest rate market, and indeed in any market where forward prices are quoted.
So for example in the interest rate market, expectations theory suggests that the current market forward interest rate is the best measure of the average market expectation of the outturn spot interest rate at the given future date.
