Foreign Exchange Market and Forward Exchange Rate Essay

Foreign Exchange Market and Forward Exchange Rate - Essay Example Foreign markets handle large transactions instantaneously at a cheap transaction cost. Rational speculative bubbles cause the exchange rates to differ from its fundamental valuation. Foreign Exchange Markets readjust to cushion the market from the departure of technical efficiency. These departures may be from panicking traders, noise traders, herding instinct, and bandwagon effects. Other factors that may lead to misalignments in the Exchange markets include traders that are caught in liquidity squeeze in other financial markets. They bring volatility to the Exchange Markets. Some forecasters strongly believe that foreign exchange markets are efficient. Similarly, they argue that forward exchange rates are unbiased predictors of future spot rates .To establish validity of efficiency in foreign exchange markets, this paper will explore the international finance theories. It will support the claims through use of appropriate examples. Efficiency in Foreign Exchange Markets Efficiency in foreign exchange market encompasses a reflection of the relevant information regarding exchange rates. Efficiency considers both the forward and spot exchange rates. Testing efficiency requires analysis of two aspects of exchange rates. These are the spot rate and the forward rate. The forward rate should have all available information about future expectations of foreign exchange rate. Analysts argue that the market is efficient when the prices reflect all relevant information. This means that the traders cannot make any alteration in order to get unjustifiable profits. The market efficiency is very beneficial to investors, exchange rate forecasters, and policy makers (Brigham & Huston, 2012: 591). The theory of efficient market demands foreign exchange markets should embrace full information of the prices. This means that traders cannot make profits through malicious old information. In addition, they cannot use the past trends of the

The Country of Asia Research Paper Example | Topics and Well Written Essays - 1000 words

The Country of Asia - Research Paper Example In India, as majority of the states possess different culture of people speaking different languages, dealings in business often becomes difficult. However, most of the business transactions in the global circuit are carried out in English language. One of the major differences of business culture between the two countries is the process of operation in business dealings while finalizing all the aspects of business. The business culture of America revolves around monetary transactions and solving problems along with finalizing dealings (Fox, 2011). The transaction of business carried out between two countries can be demarcated on the basis of greetings and introductions. From the Indian point of view, it can be stated that greetings are conducted among officials for transaction in business or in meetings, by saying ‘Namaste’. On the other hand, Western countries particularly in the US, men and women use handshakes as a mode of greeting along with using generally the firs t name of a particular individual irrespective of the position he/she possesses in the organizational hierarchy (Jhunjhunwala, 2012). In the context of taking food items during the period of business meetings, teas are generally offered for drinking purposes in India. While both non-alcoholic and alcoholic drinks are offered while conducting business meetings in the US. It is also been observed that there are no arrangements in terms of seating for informal meals, but for formal meals it can be signified as a custom in India (Martin & Chaney, 2008). The nature of meetings conducted in the two nations is not similar due to individualism and collectivism dimensions present in US and India respectively. Give and take policy in business is given... From the above description, it can be comprehended that business culture of both nations are in certain instances distinct in the context of business perspectives. It is been viewed that more essence is given to time by the US while conducting business dealings than India. Moreover, in India certain traditions and customs are strictly adhered while conducting business transactions. This report makes a conclusion that the nature of meetings conducted in the two nations is not similar due to individualism and collectivism dimensions present in US and India respectively. Give and take policy in business is given much preference than discussing in organizations on an open basis in the US. On the other hand, in India, meetings for business purposes are held for avoiding conflict situations among employees in the organizations and for providing every one equal chance to show their talents in the productivity of business. However, major discussions usually occur through communication process on a one-to-one basis. In the context of attire and appearances, it can be stated that both nations are generally identical in their approaches, i.e. men wear a suit and tie combination, while women are dressed in pantsuit, especially during business meetings. The issue of gender differences is quite distinctive among the two countries. The illiteracy rate is higher in India as co mpared to the US, especially amid the female gender. Even in case of employment, segregation among men and women can be identified in India as compared to the US.