Fair value and Four way equivalence model: Difference between pages

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imported>Doug Williamson
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imported>Doug Williamson
m (Spacing and wiki numbering 27/8/13)
 
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# The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.
A model that proposes a number of related conceptual linkages between differences in:
# More specifically, the price at which an asset can be bought or sold in transparent markets, where contracting parties are informed and act in their best interest.  It represents the theoretical equilibrium price of securities or derivatives on open markets, for example,  both buyers and sellers do not perceive them as overpriced or under-priced.
# ''Financial reporting.''  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.


: Also known as Fair market value.
(i) Interest rates;
 
(ii) Spot and forward foreign exchange rates;
 
(iii) Expected inflation rates;  and
 
(iv) The expected change in spot foreign exchange rates. 
 
 
The related individual linking theories are:
 
#Interest rate parity theory - linking interest rates & spot and forward foreign exchange rates.
#The Fisher Effect - linking interest rates with expected inflation rates.
#Expectations theory - forward foreign exchange rates and future out-turn spot foreign exchange rates.
#The International Fisher Effect - interest rate differentials and expected change in spot foreign exchange rates.
#Purchasing power parity theory - inflation rate differentials and expected change in spot foreign exchange rates.




== See also ==
== See also ==
* [[Assets]]
* [[Expectations theory]]
* [[FRS  7]]
* [[Fisher Effect]]
* [[IFRS 13]]
* [[Interest rate parity]]
* [[Liabilities]]
* [[International Fisher Effect]]
* [[Purchasing power parity]]

Revision as of 13:33, 27 August 2013

A model that proposes a number of related conceptual linkages between differences in:

(i) Interest rates;

(ii) Spot and forward foreign exchange rates;

(iii) Expected inflation rates; and

(iv) The expected change in spot foreign exchange rates.


The related individual linking theories are:

  1. Interest rate parity theory - linking interest rates & spot and forward foreign exchange rates.
  2. The Fisher Effect - linking interest rates with expected inflation rates.
  3. Expectations theory - forward foreign exchange rates and future out-turn spot foreign exchange rates.
  4. The International Fisher Effect - interest rate differentials and expected change in spot foreign exchange rates.
  5. Purchasing power parity theory - inflation rate differentials and expected change in spot foreign exchange rates.


See also

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