Factors Affecting Spot Exchange Rates

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Factors Affecting Spot Exchange Rates
The Balance of Payments Approach
Current Accounts Purchasing Power Parity (PPP)
- The price of a product - ignoring
costs like transportation and taxes
should be the same regardless of the country
where it is purchased. - Long term
trend rather than short term Market expectations
- The forward rate -
Technical Analysis
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What is a Hedge Fund
A Hedge Fund is a fund that

• can take both long and short positions
• use arbitrage
• buy and sell undervalued securities
• trade options or bonds
• invest in almost any opportunity in any market
  where it
• forsees impressive gain at reduced risk

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The primary aim

• To reduce volatility and risk while attempting to
  preserve capital and deliver positive returns
  under ALL market conditions

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Hedge Fund Strategies
The predictability of future results shows a
strong correlation with the volatility of each
strategy. Future performance of strategies with
high volatility is far less predictable than
future performance from strategies experiencing
lower moderate volatility.
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The Popular misconception

• All Hedge Funds are volatile

The Fact is,

• Less than 5 of hedge funds are global macro
  funds
• Most Hedge Funds use derivatives only for
  hedging
• or dont use derivatives at all.

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