Currencies: a separate asset class?

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来自 University of Geneva 的课程

Understanding Financial Markets

2249 个评分

University of Geneva

Understanding Financial Markets

2249 个评分

课程 1（共 5 门，Specialization Investment Management）

In this course, you will learn what the main financial markets and their characteristics are as well as how they are linked to the economy. Our very diversified team of experts will start by teaching you how the price of stocks and bonds are computed and why they move while you will become increasingly aware of the notion of risk and why it matters when measuring an investment's performance. The focus will then move to less popular markets such as gold, emerging markets, real estate, hedge funds and private markets. These will be analyzed with an emphasis on their particular risks and return opportunities as well as how they can help in building efficient portfolios. Finally, the policies of central banks and their impact on financial markets will be presented to you along with the link between the economy and the price of financial assets. All along these different steps, experts from UBS, our corporate partner, will show you how the concepts you just acquired are effectively applied in a leading global bank. This focus on practicality means you will not only understand what is going on in global financial markets but also start to figure out how you can use them to achieve financial goals, be it a client's or your own. Course Director and main teaching contributor: Dr. Michel Girardin, Lecturer in Macro-Finance, University of Geneva

从本节课中

Major Financial Markets

Fixed income - government bonds: merits - Part 17:52

Fixed income - government bonds: merits - Part 25:55

Fixed income - government bonds: merits - Part 38:56

Fixed income - government bonds: risks11:21

Fixed income - corporate bonds and high yield - UBS guest lecturer5:26

Money markets - UBS guest lecturer6:58

Currencies: a separate asset class?11:57

What is the real value of a currency?17:40

与讲师见面

University of Geneva- Ines Chaieb
SFI Associate Professor of Finance
Geneva Finance Research Institute
University of Geneva- Jonas Demaurex
Teaching Assistant
Geneva Finance Research Institute
University of Geneva- Rajna Gibson Brandon
SFI Senior Chaired Professor of Finance and Managing Director of the GFRI
Geneva Finance Research Institute
University of Geneva- Michel Girardin
Lecturer in Macro-Finance - Project Leader for the "Investment Management" specialization
Geneva Finance Research Institute
University of Geneva- Martin Hoesli
Professor of Real estate investments
Geneva Finance Research Institute
University of Geneva- Olivier Scaillet
SFI Senior Chaired Professor of Finance and Vice-dean (research) at GSEM
Geneva Finance Research Institute
University of Geneva- Philip Valta
SFI Assistant Professor of Finance
Geneva Finance Research Institute
Dirk Effenberger
UBS Guest Lecturer, Head CIO Cross-Regional Investment Office
Chief Investment Office, UBS Wealth Management
Mark Haefele
UBS Guest Lecturer, Global Chief Investment Officer
Wealth Management and Wealth Management Americas
Brian Nick
UBS Guest Lecturer, Strategist
Chief Investment Office, UBS Wealth Management Americas
Mike Ryan
UBS Guest Lecturer, Chief Investment Strategist
Chief Investment Office, UBS Wealth Management Americas
Simon Smiles
UBS Guest Lecturer, Chief Investment Officer UHNW
Chief Investment Office, UBS Wealth Management
Themis Themistocleous
UBS Guest Lecturer, Head European Investment Office
Chief Investment Office, UBS Wealth Management
Thomas Wacker
UBS Guest Lecturer, Head CIO Credit
Chief Investment Office, UBS Wealth Management
Chris Wright
UBS Guest Lecturer, Cross-Asset Strategist
Chief Investment Office, UBS Wealth Management
University of Geneva- Tony Berrada
SFI Associate Professor of Finance
Geneva Finance Research Institute

[MUSIC]

Hi, everyone.

Today, we're going to talk about currencies and

we'll see that they represent key asset class.

So in this video we will see four things.

We will see what an asset class is, how we can define it.

The different ways of quoting exchange rate, how they may impact your investment

decisions and why they should be treated separately.

When we talk about an asset class, can we define it more precisely?

Well there are no exact definitions, but maybe the best definition we can think of

is that they represent a group of securities

that has similar characteristics either they to move together.

So when we talk about asset classes, normally we think of cash,

we think of bonds, which we have seen in a couple of previous videos and

equity markets as well.

Whether currencies do represent an asset class per se, remains an open question,

and I personally believe that currencies are a separate asset class.

They should be treated separately, and I'll show you why in a minute.

But more importantly and first and foremost, we need to

know that currencies do represent the largest financial market in the world.

Indeed for one very simple reason,

every other market is labeled in a currency, so it's no wonder that

currencies do represent the largest financial market in the world.

You can see here some figures.

These are daily figures, daily volume on the Forex market,

the Foreign Exchange Market.

So survey conducted every three years by the Bank for

International settlements and you see the figures here, these are trillion dollars.

So every day you see $5.3 trillion, so 5000,

$3000 billion are treated on the currency market and

you see that this number now has been increasing steadily over the years.

When we deal with this big numbers, it's always interesting to put them in

perspective either to a GDP figure gross domestic product or international trade.

So here what we've done is we show you how these figures compare to GDP and

when I first looked at this chart I thought,

I see these lines in the bottom, the rock bottom.

Actually the blue and

the green line, United States and Japan they kind of mingle together.

It's hard to differentiate both but you see that they're very, very,

low close to zero, close to ten.

So I thought, well 10% of GDP for

the volume of the US dollar and the yen respectively to respective to their GDP.

That's not very high, but

then I realized that these were not percentages, they were time.

So here we're dealing with a country which has daily volumes in the foreign

exchange market, which represent 14 times the size of the economy so that's a lot.

And you can see that even for smaller countries like Switzerland,

this is more than 100 times.

So the daily volume traded on the Swiss francs are more than a 100 times

the size of the Swiss economy, the number is 250 times for Hong Kong,

and the record is for Singapore with more than 300 times.

In terms of volumes, it's the dollar which dominates the scene,

it represents 87% of the volume treated on the Forex market.

Then the second currency is the Euro with 33%, and the Japanese yen with have 23%.

What we don't see in this chart but what I can tell you is that emerging

market currencies do represents a minor, still low part of daily

volumes in the Forex market, but this is growing very fast.

So stay tuned to watch how these currencies

will become increasingly important in the Forex market.

When we talk about currencies,

we need to know that there are two ways of quoting them.

There's the direct way and the direct quote and there's the indirect quote.

So the direct quote is the number of units of domestic currencies,

which are needed to buy or to exchange, either buy or

sell a unit of foreign currency.

So for an example, if we think of

an investor who has Swiss franc as a reference currency,

he needs to consider whether he wants to buy some dollars.

You will have to spend 0.99 today and that's the current exchange rate

Swiss franc to purchase $1 or the same can be said about the euro.

It needs 1.08 Swiss franc to purchase one unit of foreign currency,

the euro in this instance.

So this is the norm in every country,

this direct quote except and you see the countries here.

The UK, Australia, New Zealand, Canada and the Eurozone.

In this country, we talk about indirect quotes so here it's the number of unit of

foreign currencies corresponding to one unit of domestic currency.

So it worth my 1 euro, how much can I purchase of say US dollar or

Canadian dollar or what have you?

So here you see some example.

1 euro is $1.09 US currently.

1 Australian dollar is worth $0.71 US.

Okay, so now we are going to illustrate the impact to a currency may have

on a financial market and here I take the example of the US equity market.

We see this blue line, it's the index called the S&P 500,

which represents the 500 largest companies quoted on the US equity market, and

the red line line or below is the same index but expressed in Swiss francs.

The first is expressed in US dollars the second one in Swiss franc and

that reminds me of a story that happened to me a couple of years ago.

I was head of research at a private bank here in Geneva and

this portfolio manager comes to me and he says, Michelle you always showing this

chart saying that the US security market is expensive.

The valuation is stretched and you see what that means in videos down the road.

And also okay, basically you say, well the index is at it's peak, so

maybe we should be a little bit cautious.

Then you said, hey look, look at this chart I'm investing from my

point of view it's in Swiss franc when I buy the US equity market and

I make some gain or losses I translate them in Swiss franc.

So for me as a Swiss franc based investor it's

the US equity market expressed in Swiss franc which matters.

And on this chart, the US equity market was way above, and

the US equity market expressed interest rank was way, way at the bottom.

So you tell me, it's not expensive once you express it in Swiss franc.

But I told this portfolio manager that he was maybe not, he was confusing two

things, the market for one and the currency in which it is expressed for two.

And basically, and you see the reason why it looked apparently so

cheap when you express the market in Swiss franc is because the Dollar had collapsed

in the mean time.

We see this on this long term chart.

You see that up until 1973, currencies were fixed and

the parity comes after the agreement which was made post World War II.

So called Bretton Woods agreement.

Whereby they fix the parities between currencies and

the parity of the Swiss franc was roughly 4.3 to the dollar.

This is way more than the one we currently have today.

And you see that this line has been trending down over the years.

So it's not surprising that when you express a market

in a currency which has been appreciating, over all this years like the Swiss franc

then the line may look correspondingly cheap, but it's not.

So with this example I really want to make a case here that

currencies should be treated separately, that's for sure.

And they are actually a separate asset class because they can move

independently from other markets.

The best example I can give you here, is the example of Japan.

Currently what we have in Japan is,

and we will see that when we talk about central banks.

We have a central bank, which is conducting a very accommodative policy.

Very low interest rates and program, which we will see of what it that means of

quantitative easing, so they're injecting a lot of liquidity in the market.

This has two impacts.

It has the impact of propping up the equity market.

So giving some support for the equity market to go up.

But at the same time, also it puts some pressure on the currency.

We have the same example actually, even in the Eurozone,

with the European Central Bank conducting exactly the same policy.

So rather a positive for the equity market and rather a negative for the currency.

So what you should do as an investor if you are buying the Japanese market and

you're based say in US dollars then you should buy,

you should get exposure to the Japanese equity market.

But you should hedge and we will see how we do this when we talk about

ways of insuring that your portfolio is not affected by currency moves.

Basically, you should hedge for

the risk that the yen will fall against the dollars.

So you should treat both decisions separately by the market, but

hedge the currency in which it is labeled.

Okay, so in conclusion we saw that the Forex market is actually a very large,

it's actually the largest financial market in the world.

With daily volumes which are in excess of $5,000 billion per day.

We also saw that there are two ways of quoting exchange rates,

there's the direct quote way which is commonly used.

It's so much units of domestic currencies to purchase or

sell a unit of foreign currencies but

then there's also the indirect quotes which is used in Canada,

in Eurozone, in Australia and New Zealand.

And also we thought more importantly that gains that you make in financial markets,

we took the example of the US equity market, can be raised if the currency

in which they are labeled falls versus your reference currencies.

And hence, it's very important that you should consider currencies

as a separate asset class.

[MUSIC]

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