Foreign Exchange and Cross-Border Valuation

O'Brien, Thomas J.

doi:10.2139/ssrn.348462

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Foreign Exchange and Cross-Border Valuation

22 Pages Posted: 10 Dec 2002 Last revised: 12 Sep 2017

See all articles by Thomas J. O'Brien

Thomas J. O'Brien

University of Connecticut - Department of Finance

Date Written: December 28, 2012

Abstract

I review and clarify the role of foreign exchange (FX) rates in international capital budgeting, showing how the outcome of the NPV analysis, from the perspective of the home currency, is affected by a misvalued current spot FX rate, or by a forecast of misvalued future spot FX rates.

Keywords: International, investment, foreign exchange, valuation, equilibrium, interest rate parity

JEL Classification: G31

Suggested Citation: Suggested Citation

O'Brien, Thomas J., Foreign Exchange and Cross-Border Valuation (December 28, 2012). Available at SSRN: https://ssrn.com/abstract=348462 or http://dx.doi.org/10.2139/ssrn.348462