Module 11.1, LOS 11.b: Currency Cross Rates and Triangular Arbitrage
The cross rate is the exchange rate between two currencies implied by their exchange rates with a common third currency. It is …
Module 12.3 LOS 12.i: Classical growth theory, neoclassical growth theory and endogenous growth theory
Classical Growth Theory Based on the concept of a mean-reverting subsistence level, this theory from Malthusian economics contends that there …
Module 11.3 LOS 11.k: Mundell-Fleming Model, Pure Monetary Model, Dornbusch Overshooting Model, Portfolio Balance Approach
Monetary and fiscal policies can have effects on exchange rates. The CFA curriculum covers a few theories on the mechanisms …
Module 13.1 LOS 13.a,13.b: Types of Regulators and Self-Regulation in Financial Markets
Independent regulators are given recognition by government agencies and have power to make rules and enforce them. However, independent regulators …
Module 12.2 LOS 12.e: Cobb-Douglas growth accounting
The growth in potential GDP can be expressed by the following production function, called the Cobb-Douglas production function: ∆Y/Y = …
Module 12.a LOS 12.a: Economic growth factors
Economic growth is most often described as growth in GDP. Several factors have been shown to influence the growth and …
Module 11.2 LOS 11.e: Fischer Relation and International Fischer Relation
The Fischer relation states that the nominal rate of return is approximately the sum of the real rate and the …
Module 11.3 LOS 11.j: How flows in BOP affect exchange rates
The BOP is an accounting method that tracks transactions between a country and its international trading partners. It accounts for …
Module 11.2 LOS 11.e: Purchasing Power Parity Relative PPP
PPP, also known as the law of one price, states that the same goods should be have the same price …
Module 9.5 LOS 9.m, 9.n: Testing an AR model for ARCH, nonstationarity and cointegration
ARCH is similar to autocorrelation, in fact it could be described as autocorrelation of the residuals of an AR model. …