Chapter 3 Flashcards
What is the foreign exchange market used for?
It is used to exchange one currency for another, facilitating international trade and financial transactions
History of Foreign Exchange
What is a forward contract in the foreign exchange market?
It is an agreement to exchange currencies at a future date and a predetermined exchange rate
What is a syndicated loan?
A loan provided by a group of banks when a single bank cannot meet the loan requirements of a large borrower.
What are Eurobonds?
Bonds issued in a currency different from the currency of the country where the bond is placed, typically bearer bonds with annual coupon payments.
What risks are associated with international bonds?
Interest rate risk, exchange rate risk, liquidity risk, and credit risk.
What are American Depository Receipts (ADRs)?
Certificates representing foreign stock, allowing U.S. investors to buy shares in foreign companies.
How did the Sarbanes-Oxley Act affect foreign firms listing on U.S. exchanges?
It led some non-U.S. firms to list in other countries to avoid the compliance costs associated with the act.
What is the impact of integrating international stock markets?
Stock markets in different countries are interconnected, and changes in one country’s financial conditions can affect others.
What is the Basel III Accord?
It is a global regulatory framework that increased capital requirements for banks to reduce risks in the banking system after the 2008 financial crisis.
What role do the international bond markets play?
They facilitate long-term credit transfers, enabling governments and large corporations to borrow funds from various countries
How are international credit markets different from international money markets?
International credit markets focus on medium-term loans rather than short-term loans.
How do international stock markets assist multinational corporations (MNCs)?
They enable firms to obtain equity financing in foreign countries, supporting their international expansion.
Bid/Ask Formula
