Browse CFA Level 1

Chapter 6: Currency Exchange Rates

Chapter 6: Currency Exchange Rates (CFA Level 1): Key concepts, definitions, and exam tips with practical examples. Use it to reinforce intuition and avoid common pitfalls.

In this section

  • Nominal versus Real Exchange Rates
    Nominal versus Real Exchange Rates (CFA Level 1): Nominal Exchange Rates, Real Exchange Rates, and Role of Inflation. Key definitions, formulas, and exam tips.
  • Exchange Rate Determination and Regimes
    Exchange Rate Determination and Regimes (CFA Level 1): Key Drivers of Exchange Rate Determination, Trade Flows, and Interest Rate Differentials. Key definitions, formulas, and exam tips.
  • Purchasing Power Parity and Interest Rate Parity
    Purchasing Power Parity and Interest Rate Parity (CFA Level 1): Purchasing Power Parity, Absolute Purchasing Power Parity, and Relative Purchasing Power Parity. Key definitions, formulas, and exam tips.
  • Spot and Forward Exchange Rates
    Spot and Forward Exchange Rates (CFA Level 1): Spot Exchange Rates, Practical Spot Market Dynamics, and Forward Exchange Rates. Key definitions, formulas, and exam tips.
  • Triangular Arbitrage and Cross Rates
    Triangular Arbitrage and Cross Rates (CFA Level 1): Cross Rates Explained, Triangular Arbitrage: The Big Picture, and Why Does Mispricing Occur?. Key definitions, formulas, and exam tips.
  • Currency Hedging, Speculation, and Carry Trades
    Currency Hedging, Speculation, and Carry Trades (CFA Level 1): Purpose of Currency Hedging, Common Hedging Tools, and Tools for Currency Hedging. Key definitions, formulas, and exam tips.
  • Effective Exchange Rate Indices
    Effective Exchange Rate Indices (CFA Level 1): Nominal Effective Exchange Rate (NEER), Why Use NEER?, and Limitations of NEER. Key definitions, formulas, and exam tips.
  • The Impossible Trinity (Monetary Policy, Exchange Rates, Capital Flows)
    The Impossible Trinity (Monetary Policy, Exchange Rates, Capital Flows) (CFA Level 1): Core Concepts of the Trilemma, Why Is This “Impossible”?, and Policy Trade-Offs and Strategies. Key definitions, formulas, and exam tips.
  • Exchange Rate Pass-Through to Domestic Prices
    Exchange Rate Pass-Through to Domestic Prices (CFA Level 1): Key Concepts of Exchange Rate Pass-Through, Types of Exchange Rate Pass-Through, and Determinants of Pass-Through Intensity. Key definitions, formulas, and exam tips.

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Chapter 5: International Trade and Capital Flows
Chapter 7: Monetary System, Monetary and Fiscal Policy