Lesson 1: Introduction to Global Finance Flashcards
Sometimes known as International Finance or International macroeconomics. It is the study of monetary interactions between two or more countries.
Global Finance
It deals with the economic interactions between multiple countries.
International Finance
is conducted by large institutions such as the International Finance Corporation and the National Bureau of Economic Research.
International Finance Research
Studies the integration between the goods market and the money market, based in the assumption that price levels of said goods are fixed.
Mundell-fleming model
Theory that assumes nominal interest rates mirror fluctuations in the spot exchange rate between nations.
International Fisher Effect
States that certain geographical regions would maximize economic efficiency if the entire area adopted a single currency.
The Optimum Currency Area Theory
Measurement of prices in different areas using a specific good or a specific set of goods to compare the absolute purchasing power between different countries.
Purchasing Power Parity
Describes an equilibrium state in which investors are indifferent to interest rates attached to bank deposits in two separate countries.
Interest Rate Parity
An example of International Institution of International finance.
Bretton Woods system
The collective goal of this initiative was to standardized international monetary exchanges and policies in a broader effort to create post world war II stability.
Bretton woods system
A consortium of 189 countries dedicated to creating global monetary cooperation.
International Monetary Fund
Also known as the World Bank
International Bank for Reconstruction and Development
is arguably the most important influencer of global prosperity and growth.
International Trade
Enumerate the Specific areas of study which International Finance analyzes:
(1) Mundell-fleming Model
(2) International Fisher Effect
(3) The Optimum Currency Area Theory
(4) Purchasing Power Parity
(5) Interest Rate Parity
Example of International Institutions of International Finance
(1) International Monetary Fund
(2) International Bank for Reconstruction and Development.
issued to investors to raise the necessary fund to finance the companies operation in exchange for capital.
Stocks
Debt securities with a fixed interest rate on maturity date.
Bonds
Collection of all Finance assets.
Portfolio
Examples of financial assets
(1) Stocks
(2) Bonds
(3) Cash
(4) Cash Equivalents
(5) Bank Deposits
(6) Loans
Purpose of Portfolio
Diversification
is a strategy that mixes a wide variety of investments within a portfolio in an attempt to reduce portfolio risk. Diversification is most often done by investing in different asset classes such as stocks, bonds, real estate, or cryptocurrency.
Diversification
