International Economics Formulas

GDP vs. GNP

$GNP=GDP+\text{Net factor income from abroad}$

Balance of Payments

$\text{Current Account}+\text{Capital Account}+\text{Financial Account}=0$

Cross Rates

$\frac{A}{C}=\frac{A}{B}\times \frac{B}{C}$

Covered Interest Rate Parity

$\frac{F_{A/B}}{S_{A/B}}=\frac{1+r_A}{1+r_B}$

where $F$ = forward exchange rate, $S$ = spot exchange rate, $r_A$, $r_B$ = interest rates for currencies A and B

Forward Premium/Discount

$\text{Forward premium (discount)}=\frac{F-S}{S}\times \frac{360}{\text{days}}$

• Premium if $F>S$ (base currency appreciating)
• Discount if $F<S$ (base currency depreciating)

Forward Rate from Points

$F=S+\text{Forward points}$

Bid-Ask Spread

$\text{Spread}=\text{Ask}-\text{Bid}$ $\text{Spread \%}=\frac{\text{Ask}-\text{Bid}}{\text{Ask}}\times 100$