International Financial Risk and Control Essay Example | Topics and Well Written Essays - 2000 words

transnational Financial Risk and Control - Essay ExampleIt is imperative for transnational business organizations to recognize the determinants of diversify rates and whether the exchange rate variations can be forecasted. International parity conditions refer to the economic theories that bind exchange rates, level of prices as well as the interest rates. In this study, we would attempt to see whether the internationalistic parity conditions are effective in forecasting the variations in the exchange rates in the authentic world. In doing so, we would consider the bilateral exchange rate movements of Euro/ dollar bill over the past twelve months and keep an eye on whether the variations were consistent with one or more of the International Parity Conditions. Subsequently, we would conclude the study by discussing the accomplishment of effectiveness of the International Parity Conditions as a forecasting tool (Eiteman et al., 2007, p.170). In this section of the study, we woul d respect the relative exchange rate movement of Euro expressed in terms of United States Dollar. For the convenience of the study, the Euro versus Dollar exchange rate fluctuations for the period of last twelve months were considered. However, to analyze the latest trend of the Euro/USD exchange rate, we would initially focus on the last 120 days movement of the currency. During this period, the highest value for Euro was 1.3788 USD (as recorded on November 8, 2011) tour the lowest value of Euro during the same period was 1.2669 (as recorded on January 16, 2012). The latest value of 1 Euro (as on April 20, 2012) was observed to be 1.3192 USD (Source X-Rates, 2012). The graph above represents the exchange rate movements EUR/USD for the period starting from May 2011 and culture at April 2012. A closer look at the exchange rate chart reveals that the value of Euro in terms of USD during the specified time frame had fluctuated from 1.45 to around 1.3 USD approximately.