...Chapter 5 Exchange Rate Systems questions 1. How can you quantify currency risk in a floating exchange rate system? Answer: To characterize the risk of a currency position, you must try to characterize the conditional distribution of the future exchange rate changes. With floating exchange rates, historical information provides useful information about this distribution. For example, you can use data to measure the average historical dispersion (standard deviation or volatility) of the distribution. The higher this volatility, the riskier are positions in this currency. It is also possible to rely on more forward-looking information using the options markets (see Chapter 20). Finally, we should point out that volatility is an adequate indicator of risk when exchange rate changes are approximately normally distributed. In reality, the distribution of exchange rate changes displays fat tails, even in floating exchange rate systems, and this increases the risk of currency positions. 2. Why might it be hard to quantify currency risk in a target zone system or a pegged exchange rate system? Answer: If the peg or target zone holds for a long time, historical volatility appears to be zero or very limited, but this may not accurately reflect underlying tensions that may ultimately result in a devaluation or revaluation of the currency. Hence, the true currency risk does not show up in day-to-day fluctuations of the exchange rate. It is hard to quantify this...
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...Alexis McGregor Hoover High School Des Moines, IA Zimbabwe, Factor 7: Animal Agriculture Zimbabwe: Overcoming Hunger Through the Improvement of Agricultural Education and the Issue Over Social Inequality What is hunger? Many would probably say it is that mildly uncomfortable feeling that you get after not eating for a few hours. The majority of people use the phrase “I’m starving!” when they get this feeling. But what about the 805 million people in which “starving” means not knowing where their next meal is coming from. Agriculturalists and world food leaders now face a huge challenge: in feeding the 9 billion people who are projected to be on Earth by 2050 (Nat’l Geographic). Of the 196 sovereign countries in the world, 147 are considered underdeveloped and lack food security, Zimbabwe being one of them. Zimbabwe is located in the southern portion of Africa, surrounded by Botswana, South Africa, Zambia, and Mozambique, making it a land-locked state. Zimbabwe has a total land area of 390,757 square miles and is home to 13,771,721 people (CIA World Factbook). The land is composed of mostly high plateaus with mountains in the east. With a tropical climate, the country has rainy seasons between November and March but is currently suffering from an extensive drought due to unreliable rainfall. The frequent droughts that occur throughout the year make it especially hard for farmers, ranchers, and families who depend on sustainable agriculture as their main source of...
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