Fisher Effect and Replacement cost risk: Difference between pages

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imported>Doug Williamson
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imported>Doug Williamson
m (Spacing 20/8/13)
 
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The theory that 'real' (= excluding inflation) interest rates should be the same in different currencies.
The risk of loss arising from the need to replace a contract before having paid away the principal amount.  


From this theory it then follows that any observed differences in nominal interest rates (= including inflation) are explainable by differences between the inflation expectations for the two related currencies.
Often quantified approximately as the expected profit foregone.




== See also ==
== See also ==
* [[Carry trade]]
* [[Credit risk]]
* [[Expectations theory]]
* [[Principal risk]]
* [[Four way equivalence model]]
* [[Inflation]]
* [[Interest rate parity]]
* [[International Fisher Effect]]
* [[Nominal rate]]
* [[Purchasing power parity]]
* [[Real rate]]
 
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Financial_products_and_markets]]

Revision as of 14:50, 20 August 2013

The risk of loss arising from the need to replace a contract before having paid away the principal amount.

Often quantified approximately as the expected profit foregone.


See also