2025 CFA Level II Exam: Topic 2. Economics - Learning Module 8. Currency Exchange Rates: Understanding Equilibrium Value

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	1. Foreign Exchange Spot Markets explain spot and forward rates and calculate the forward premium/discount for a given currency; calculate the mark-to-market value of a forward contract;
	2. Foreign Exchange Forward Markets explain international parity relations (covered and uncovered interest rate parity, forward rate parity, purchasing power parity, and the international Fisher effect); describe relations among the international parity conditions; evaluate the use of the current spot rate, the forward rate, purchasing power parity, and uncovered interest parity to forecast future spot exchange rates; explain approaches to assessing the long-run fair value of an exchange rate;
	3. A Long-Term Framework for Exchange Rates describe the carry trade and its relation to uncovered interest rate parity and calculate the profit from a carry trade;
	4. The Carry Trade explain how flows in the balance of payment accounts affect currency exchange rates;
	5. The Impact of Balance of Payments Flows explain the potential effects of monetary and fiscal policy on exchange rates;
	6. Monetary and Fiscal Policies describe objectives of central bank or government intervention and capital controls and describe the effectiveness of intervention and capital controls;
	7. Exchange Rate Management: Intervention and Controls describe warning signs of a currency crisis.
	8. Currency Crises compare factors favoring and limiting economic growth in developed and developing economies;

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