AboutWarren D. Miller, CFA, ASA, CPA Expertise My in-depth knowledge of economics is confined to three sub-disciplines: Austrian economics, industrial organization, and evolutionary economics. Other questions dealing with macroeconomics, the traditional neoclassical paradigm, labor economics, environmental economics, agricultural economics, health economics, and so on should go to those who have the appropriate expertise.
N.B.: I DO NOT ANSWER QUESTIONS MARKED 'PRIVATE' because I believe that knowledge should be shared, not hoarded. I also believe that such questions are likely to come those trying to cheat. Similarly, as one who was a full-time academic for half a decade, I can recognize test and homework questions several time zones away. Therefore, please do not demean yourself by submitting such questions to me. Those who do so are cheating, pure and simple, and I WILL call you out publicly if I believe you are doing so. I have a zero-tolerance policy where cheating and dishonesty are concerned.
In addition, please don't be like the businessman who posted a request for help in August 2008. He expressly denied that he was seeking "investment advice" and said that his query was for, and I quote, "educational and informational purposes." In a follow-up query, however, he allowed as how his first questions related to the possible purchase of a $500,000 piece of equipment. Well, he was trying to get for free the kind of sophisticated advice that our clients pay for. I told him that I thought he had not been forthcoming in what he said initially (I was being polite). Bottom line is this: high-end business consulting is what I do for a living. I am the sole support for my family. Please respect that fact and don't try to steal what our clients pay for. That demeans you and insults me.
Finally, please DO NOT ask for investment advice. I am not licensed to provide such advice. If you want such advice, check with your financial planner or other financial adviser.
Experience I work with Austrian economics (which is different in major respects from the traditional neoclassical model), industrial organization (which is about industry structure, conduct, and performance), and evolutionary economics (almost, but not quite, the economic analog of its biological counterpart) everyday in my work. I appraise closely-held businesses, provide exit-planning services, and offer high-level strategic analysis, advice, and clients to CEOs and owners of mid-sized businesses. Understanding, applying, and writing about these disciplines is an essential part of how I have made my living since 1993.
Organizations CFA Institute, Strategic Management Society, American Society of Appraisers, Institute of Management Accountants, Academy of Management, Culver Legion
Publications CFA Magazine, Strategic Finance, Valuation Strategies, Value Examiner, Journal of Advanced Property Economics, Harvard Business Review, American Fly Fisher, CFA Digest, CPA Expert, and Business Valuation Review, among others
Education/Credentials MBA - Oklahoma State (1991)
BBA - U. of Oklahoma (1975)
Chartered Financial Analyst designation (2006)
Accredited Senior Appraiser (2006)
Certified Management Accountant (1992)
Certified Public Accountant (1992)
Question Do you have a better yield by converting INR into GBP, or by buying the USD of equivalent amount of GBP and converting the INR into USD? why?
Answer Dear Manish--
Thank you for your question, and thank you for using AllExperts.com. The answer to your question is circumstance-specific. In other words, 'It depends.' Let me tell you all of the things that it depends on.
First, however, let me point out that I have changed the 'Subject' of your inquiry from 'Billing currency' to 'Interest Rate Parity.' The latter is less ambiguous.
Second, for those who might not understand your acronyms, let me clarify what they mean:
INR = Indian rupees
GBP = Great Britain pound
USD = U.S. dollars
Third, we have to make an assumption about whether the currency markets are efficient (no riskless arbitrage opportunity exists) or inefficient (riskless arbitrage opportunity does exist). Any arbitrage opportunity that exists is quickly eliminated by people buying the underpriced currency and selling the overpriced one. In case you want to read more about arbitrage, here's a link w/other links within it: http://www.allbusiness.com/glossaries/arbitrage/4942855-1.html. For the sake of simplicity, we will assume that there is no riskless arbitrage situation. If the opposite is true, then 'covered interest arbitrage' comes into play: http://www.allbusiness.com/glossaries/covered-interest-arbitrage/4949058-1.html
Fifth, FX (foreign exchange) rates are a function of supply and demand, of course, but they primarily depend on FX rates in the 'spot market' and those quoted in markets for 'forward rate agreements' (http://www.investopedia.com/terms/f/fra.asp). The challenge of such agreements is that they are not exchange-traded. That is, 'counterparty risk' exists - that is the risk that the other party to the agreement does not perform, in case it becomes necessary. All forwards are individually negotiated (http://www.investorwords.com/2060/forward_contract.html).
So, the answer to your question is, as I said earlier, Manish, "It depends." As I hope you can see from my explanation and from the links I have provided, the answer in a given situation requires a lot of information. That information can and will change continually. FX markets, forwards, etc., are no place for individual investors like you and me. Take that to the bank, my friend.
I hope I have been helpful. Please complete the 'rate-the-expert' email you will receive right after you get this email. Your ratings help me help folks like you.
