Multinational financial management alan shapiro 7 th edition j wiley sons
Download
1 / 18

Multinational Financial Management Alan Shapiro 7th Edition J.Wiley Sons - PowerPoint PPT Presentation


  • 123 Views
  • Uploaded on

Multinational Financial Management Alan Shapiro 7 th Edition J.Wiley & Sons. Power Points by Joseph F. Greco, Ph.D. California State University, Fullerton. CHAPTER 13. THE EUROMARKETS. CHAPTER OVERVIEW:. I. THE EUROCURRENCY MARKETS II. EUROBONDS

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Multinational Financial Management Alan Shapiro 7th Edition J.Wiley Sons' - zazu


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Multinational financial management alan shapiro 7 th edition j wiley sons

Multinational Financial ManagementAlan Shapiro7th EditionJ.Wiley & Sons

Power Points by

Joseph F. Greco, Ph.D.

California State University, Fullerton


Chapter 13

CHAPTER 13

THE EUROMARKETS


Chapter overview
CHAPTER OVERVIEW:

I. THE EUROCURRENCY MARKETS

II. EUROBONDS

III.NOTE ISSUANCE FACILITIES AND EURONOTES

IV. EUOR COMMERCIAL PAPER

V. THE ASIA CURRENCY MARKETS


I the eurocurrency markets
I. THE EUROCURRENCY MARKETS

THE EUROMARKETS

-the most important international financial markets today.

A. The Eurocurrency Market

1. Composed of eurobanks who accept/maintain deposits of foreign currency

2. Dominant currency: US$


The eurocurrency markets
THE EUROCURRENCY MARKETS

B. Growth of Eurodollar Market

caused by restrictive US government

policies, especially

1. Reserve requirements on deposits

2. Special charges and taxes

3. Required concessionary loan rates

4. Interest rate ceilings

5. Rules which restrict bank competition.


The eurocurrency markets1
THE EUROCURRENCY MARKETS

C. Eurodollar Creation involves

1. A chain of deposits

2. Changing control/usage of deposit


The eurocurrency markets2
THE EUROCURRENCY MARKETS

3. Eurocurrency loans

a. Use London Interbank Offer Rate: LIBOR as basic rate

b. Six month rollovers

c. Risk indicator: size of margin between cost and rate charged.


The eurocurrency markets3
THE EUROCURRENCY MARKETS

4. Multicurrency Clauses

a. Clause gives borrower option to

switch currency of loan at rollover.

b. Reduces exchange rate risk


The eurocurrency markets4
THE EUROCURRENCY MARKETS

5. Domestic vs. Eurocurrency Markets

a. Closely linked rates by arbitrage

b. Euro rates: tend to lower lending, higher deposit


Ii eurobonds
II. EUROBONDS

A. DEFINITION OF EUROBONDS

bonds sold outside the country of currency denomination.

1. Recent Substantial Market Growth

-due to use of swaps.

a financial instrument which

gives 2 parties the right to

exchange streams of income

over time.


Eurobonds
EUROBONDS

2. Links to Domestic Bond Markets

arbitrage has eliminated interest

rate differential.

3. Placement

underwritten by syndicates of banks


Eurobonds1
EUROBONDS

4. Currency Denomination

a. Most often US$

b. “Cocktails” allow a basket of

currencies

5. Eurobond Secondary Market

-result of rising investor demand

6. Retirement

a. sinking fund usually

b. some carry call provisions.


Eurobonds2
EUROBONDS

7. Ratings

a. According to relative risk

b. Rating Agencies

Moody’s, Standard & Poor

8. Rationale For Market Existence

a. Eurobonds avoid government

regulation

b. May fade as market deregulate


The euromarkets
THE EUROMARKETS

B. Eurobond vs. Eurocurrency Loans

1. Five Differences

a. Eurocurrency loans use variable rates

b. Loans have shorter maturities

c. Bonds have greater volume

d. Loans have greater flexibility

e. Loans obtained faster


Iii note issuance facilities and euronotes
III. NOTE ISSUANCE FACILITIES AND EURONOTES

A. Note Issuance Facility (NIF)

1. Low-cost substitute for loan

2. Allows borrowers to issue own notes

3. Placed/distributed by banks


Note issuance facilities and euronotes
NOTE ISSUANCE FACILITIES AND EURONOTES

B. NIFs vs. Eurobonds

1. Differences:

a. Notes draw down credit as needed

b. Notes let owners determine timing

c. Notes must be held to maturity


Iv euro commercial paper
IV. EURO-COMMERCIAL PAPER

I. SHORT-TERM FINANCING

A. Euronotes and Euro-Commercial Paper

1. Euronotes

unsecured short-term debt securities denominated in US$ and issued by corporations and governments.

2. Euro-commercial paper(CP)

euronotes not bank underwritten


Euro commercial paper
EURO-COMMERCIAL PAPER

B. U.S. vs. Euro-CPs

1. Average maturity longer (2x)

for Euro-CPs

2. Secondary market for Euro;

not U.S. CPs.

3. Smaller fraction of Euro use

credit rating services to rate.


ad