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GBU 201-001 • CRN 20319 • T,R 1230 to 1345 • Combs 213
Copyright ©2005 C.Siegel
MKT309 • MKT401 • GBU201

Ch 9 International Financial Markets
Opening Case - Nintendo
Why are efficiently-operating financial markets important to international businesses, to domestic businesses, to governments, to individuals?

International capital market
Make debt/equit allocations through trades
Purposes of national capital ... role of debt, equity
Purposes of international capital market ... money supply, costs, risks
Forces expanding capital markets - IT, globalization, deregulation, new financial instruments
World financial centers - new trading centers

Main components of the international capital market
What roles do they play?
Bond market • Equity market • Eurocurrency market
Microcredit - Grameen Bank

Foreign exchange (FX) market
Functions ... Currency conversion, hedging, arbitrage, speculation
Quoting currencies ... quoted, base - The Universal Currency Converter

Exchange rate risk
Importance of stability vis-a-vis prediction accuracy
Cross rates - benchmark cross rates - Bloomberg
Spot rates, forward rates
Swaps, options, futures
Government moves (devaluation, revaluation) and market moves (appreciation, depreciation)

Foreign exchange market today
FX markets most liquid
Primarily trade against US$ (USD); other major FX currencies - ¥, £, €, CAD, AUD
Important currencies - role of the greenback, Euro
Institutions ... interbank market, securities exchanges, OTC market
Trading centers

Currency convertibility (and non-convertibility)
Case of Pepsi in USSR - countertrade
Currency restriction
Barter (reciprocal trade)

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