2. Economics

Question 1

Bid Price

Answer 1

• Price @ which the dealer BUYS

- Price where I sell

Question 2

Offer Price

Answer 2

• Price @ which the dealer SELLS/OFFERS

- Price where I buy

Question 3

Fwd (Formula)

Answer 3

Fwd = Spot * [1 + if*(Act/360)] / [1 + id * (Act/360)]

Question 4

Dealer v Market

Answer 4

Comprar barato: Dealer Offer > Interbank Bid

Vender caro: Dealer Bid < Interbank Offer

Question 5

Fwd Spread (Formula)

Answer 5

Ff/d - Sf/d = Sf/d * [ (Act/360) / 1 + id (Act/360)] (if-id)

Question 6

How to Close a Fwd

Answer 6

1. Buy currency @ offer / Sell @ the bid
2. No dia específico, feche a posição fazendo a operação contrária @ preço + bps futuros do tempo T restante
3. Para saber a ordem da conta, check if what you hold apreciou / depreciou
4. Desconte a valor presente pelos juros da moeda do payoff (price base)

Question 7

Rolagem de Fwd no Fechamento (Steps)

Answer 7

1. Close the actual position by spot (mid between bid-offer)
2. Enters in a new fwd
3. Calculate net

Question 8

Parity Conditions

Answer 8

• Covered Interest Rate Parity
• Uncovered Interest Rate Parity
• Fisher (domestic and international)
• PPP (absolute)
• PPP (relative)
• Juros sempre nominais (checar)

Question 9

Covered Interest Rate Parity (formula)

Answer 9

Fwd = Spot * (1 + ip)/(1+ib)

Question 10

Uncovered Interest Rate Parity (formula)

Answer 10

Δ%Sa/b = (Ra - Rb)

• Asset returns should be equal in different countries.
• Interest rates differential adjusts this
• Hold in the long run (not ST, MT)
• Impede profits shorting low yield; long high yield.

Question 11

Fisher Domestic

Answer 11

If - Id (nominal) = (rf - rd) + (πf - πd)

Diferencial nominal de juros = Yield Spread + Inflation Spread

Question 12

Fisher International

Answer 12

Ra - Rb (nominal) = πexpA - πexpB

Diferencial de Juros = Diferencial de Expectativas de Inflação

Question 13

PPP Absolute

Answer 13

Spot = Diferença entre níveis de preço entre 2 países

Pf / Pd = Sf/d

Question 14

PPP Relative

Answer 14

Δ%Spot A/B = (πA - πB)

Question 15

Ex Ante PPP

Answer 15

• Igual a Relative PPP , mas usa Expected Inflation

Δ%Spot A/B = (πEXPa - πEXPb)

Question 16

If Ex Ante PPP + UIRP holds

Answer 16

• Juros global é o mesmo

Question 17

Supply/Demand Channel (BoP)

Answer 17

If X > M, more people abroad demand local currency and it appreciates (contraintuitivo)

Question 18

Portfolio Balance Approach (BoP)

Answer 18

Country w/ CA surplus sends capital to country in deficit. Country w/ deficit remains susceptible to selloff.

Question 19

Debt Sustainability Channel (BoP)

Answer 19

Debt/GDP should be sustainable in the long term

Question 20

Capital Accounts

Answer 20

Hot Money may be the bad guy

Question 21

Mundell Fleming

Answer 21

Pensa no fluxo de capitais

↑ High Rates = ↑ Capital Flows (e vice-versa)

Question 22

Mundell Fleming (Fixed FX)

Answer 22

Monetário Expansionista: Argentina vai ter que recomprar FX com reserva cambial, ou seja, não ajuda tanto o monetário

Fiscal Expansionista: Teoricamente pode vender eternamente

Question 23

Mundell Fleming (High Mobility)

Answer 23

Canal Fiscal: Juros (Fluxos de Capital)
↑ Juros (Expansionista) = Moeda APRECIA
↓ Juros (Restritiva) = Moeda DEPRECIA

Canal Monetário:
↓ Juros (Expansionista) = Moeda DEPRECIA
↑ Juros (Restritiva) = Moeda APRECIA

Question 24

Mundell Fleming (Low Mobility)

Answer 24

Canal Fiscal: Demanda Agregada
↑ Demanda (Expansionista) = Moeda DEPRECIA
↓ Demanda (Restritiva) = Moeda APRECIA

Canal Monetário: (X-M)
Expansionista = Moeda DEPRECIA
Restritiva = Moeda APRECIA

Question 25

Pure Monetary Approach

Answer 25

- Milton Friedman (mv = py) | - If PPP holds, aumento de oferta monetária aumentará inflação doméstica = repasse cambial.

Question 26

Dornbusch Overshooting Model

Answer 26

Prices lag to respond (sticky) Short Run: ↑ M0 = ↑ CPI does not change Long Run: ↑ M0 = ↑ CPI = ↓ Sf/d

Question 27

FX Interventions (IMF Guidelines)

Answer 27

FX undervalued: don't act FX overvalued: π threat: ↑ M0, mas esteriliza vendendo bonds π not a threat: Pode imprimir M0

Question 28

1. Macro Balance Approach (IMF Guidelines)

Answer 28

FX aprecia/deprecia p/ fechar a Conta Corrente

Question 29

2. External Sustainability (IMF Guidelines)

Answer 29

FX aprecia/deprecia p/ balanear as Contas Externas

Question 30

3. Reduced Form Econometric Model (IMF Guidelines)

Answer 30

FX = Função de várias coisas

Question 31

Equity and Economic Growth Relationship (Formula)

Answer 31

Δ%Peqt = Δ%GDP + Δ%E/GDP + Δ%P/E

Question 32

Cobb-Douglas Function (Formula)

Answer 32

Y = T* (K^α) * (L^(1-α)) | Production Function

Question 33

Alpha (α) Definition

Answer 33

% of GDP allocated to Kapital

Question 34

(1-α) Definition

Answer 34

% of GDP allocated to Labor

Question 35

"T" or "A" Definition

Answer 35

Total Factor Productivity

Question 36

Capital Deepening Limitations

Answer 36

It has diminishing marginal returns

Question 37

Alpha (α) Formula

Answer 37

α = rK/Y

Question 38

MPK (Formula / Definition)

Answer 38

MPK = r = αY/K

Question 39

Work Productivity Definition

Answer 39

Labor Productivity = Growth Technology + Growth Capital Deepening (limited)

Question 40

Growth Accounting Relations

Answer 40

ΔY/Y = ΔA/A + α (ΔK/K) + [(1-α) *ΔL/L] - Coloca tudo em derivada - Usa pra calcular PIB Potencial

Question 41

Potential GDP Formulas

Answer 41

1) Δ% GDP = (α * Δ%K) + [(1-α) * Δ%L] 2) Δ% GDP = Δ%Labor Force + Δ%Productivity 3) Δ% GDP = Tech + (α*Kapital) + [(1-α)*Labor]

Question 42

Malthus Model

Answer 42

- Income rises, population growths until additional resources are completely depleted

Question 43

Neoclassical Model

Answer 43

- Parte da função de produção de Cobb-Douglas - No equilíbrio, k e y (capital e output per worker) crescem a uma mesma taxa CONSTANTE - Nos eixos X e Y estarão k e y, respectivamente - No steady state, Capital Deepening não afeta (i) taxa de cresciemnto da economia ou (ii) MPK

Question 44

Output Per Capital Growth Rate (Formula)

Answer 44

g* = θ / (1-α)

Question 45

Output Growth Rate (Formula)

Answer 45

G* = θ / (1-α) + ΔL/L

Question 46

Fórmula da Constante Y/K

Answer 46

Ψ = Y/K = (1/s) * [θ / (1-α)] + δ + ΔL/L, where ``` s = savings δ = depreciation ``` S = [θ / (1-α) + δ + n] *k, pra manter a porra toda

Question 47

Endogenous Growth Theory

Answer 47

- K has no diminishing marginal returns | ↑ S ou ↑ Inv = ↑ Rate of Economic Growth

Question 48

Convergence Theories (types)

Answer 48

É do modelo neoclássico. Não é endógeno. 1) Abolute: EM will achieve DM because everyone has the same technology 2) Conditional: Convergence occurs only if countries have the same Savings, Population Growth and Production Functions 3) Club Convergence: OECD rules

Question 49

Economics of Regulation RATIONALE

Answer 49

1) Informational assymetry | 2) Externalities

Question 50

Eco of Regulation PURPOSE

Answer 50

1) Regulate commerce (tax, labor, banking, bankruptcy, contract, competition) 2) Regulate financial markets

Question 51

Net Regulatory Burden (Formula)

Answer 51

1. NRB = (Reg Burden - Private Benefits) 2. Reg Burden = Cost of Compliance for Regulated Entity 3. Cost of Compliance = Direct + Unanticipated + Unintended

Question 52

Organization Classifications

Answer 52

1. Self-Regulatory Bodies: Regulate its own members. Power from its own members. 2. Self-Regulatory Org: SRB recognized by the government

Question 53

Regulatory Competition

Answer 53

EU v. UK for financial markets

Question 54

Regulatory Arbitrage

Answer 54

Buscar jurisdições favoráveis ao invés de mudar o próprio comportamento

Question 55

Regulatory Capture

Answer 55

Conflito de interesse entre profissionais de mercado e management de instituições reguladoras

Question 56

Regulatory Intervention Mechanisms

Answer 56

1. Price (tax, subsidies) 2. Restriction for licenses 3. Provision of public goods (monopoly - PETR4)