Exchange Risk and Yield Differentials

  • Robert Z. Aliber


Changes in exchange rates are inevitable in a world of more than one hundred national currencies. Investors may be able to advance their economic welfare by acquiring assets denominated in currencies they expect to appreciate and selling assets and issuing liabilities denominated in currencies they expect to depreciate. As investors revise their holdings of assets denominated in different currencies, exchange rates should change. At any moment individual investors must determine whether the anticipated changes in the exchange rates have been fully discounted in other economic variables, or whether there remains an unexploited profit opportunity.


Exchange Rate Interest Rate Monetary Policy Purchasing Power Parity Spot Rate 
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  1. Lawrence H. Officer, ‘The Purchasing Power Parity Theory of Exchange Rates: A Review Article’, Staff Papers (Mar 1976).Google Scholar
  2. Lawrence H. Officer and Thomas O. Willet. ‘The Covered Arbitrage Schedule: A Critical Survey of Recent Developments’, Journal of Money, Credit and Banking (May 1970).Google Scholar
  3. Robert Z. Aliber, ‘The Interest Rate Parity Theory: A Reinterpretation’, Journal of Political Economy (Nov–Dec 1973 ).Google Scholar

Copyright information

© Robert Z. Aliber 1978

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  • Robert Z. Aliber

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