Lecture
This lecture covers the relationship between exchange rates and asset returns, focusing on the rate of return of deposits in specific currencies, the concept of nominal and real rate of return, and the equilibrium exchange rate. It explains how to approximate the rate of return on a deposit, the impact of deposit maturity on expectations, and the interest parity condition in the foreign exchange market. The lecture also delves into forward exchange rates, covered interest parity condition, and FX options such as put and call options.