why is the difference in interst rates deducted? I understand that this is risk of the domestic currency appreciating...作者: WarrenB1 时间: 2011-7-13 16:30
If the expected spot rate in the future keeps pace exactly with Interest rate differential , there is no premium over the forward rate , so no need to adjust the discount rate further.
If the expectation is different than the forward rate , a premium needs to be calculated to calcualte a sensitivity of the discount rate to the currency rate change
