Hi guys,
I guess you all heard about value investing in the stockmarket by discounting back the cashflows a stock is producing. I was wondering if you could apply the DCF method as well to currency pairs.
Questions that come to my mind:
I guess you all heard about value investing in the stockmarket by discounting back the cashflows a stock is producing. I was wondering if you could apply the DCF method as well to currency pairs.
Questions that come to my mind:
- is a value investing approach at all useful for currency pairs?
- how would one construct a financial statement. Is it the financial statements of the central banks? what about P&L and cash-flow statement?
- which interest rate do you use for your cashflows? just the minimum rate or the rate that companies get from banks including all the margins
- what discount factor would you use? 30-year treasury bond?
- what growth factor do you apply for the continuing value?
- how would you then construct the value of a currency pair? taking the sum of the discounted cash-flows of EUR and put it into relation with the sum of discounted cash-flows of USD?
I would love to have a good discussion about that - but please, let's keep the topic around value investing. No price action, trend searching and other mumbo jumbo.