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Learn about commercial paper, trade financing, and bankers' acceptances in the money market. Explore their evolution and the role of banks, facilitating international trade transactions and Eurocurrency market dynamics.
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The Money Market and Money-Market Instruments (2) Week 11 – November 2, 2005
Commercial Paper • Short-term (270 days or less) to avoid SEC registration • Directly placed commercial paper • Dealer-placed commercial paper • Role of banks • Commercial paper as substitute for loans • Market making and guarantees by banks
International Trade Transactions • Trade financing • Goods in transit • Documentation • Bills of lading, inspection certificates, insurance • Facilitates flow of goods between unknown trading partners • Role of banks and importance of letters of credit and correspondent banks
Eurocurrency • History of the market • Reasons for the market • Interest rate regulation • Deposit creation • Flexibility • Eurodollars and other currencies
Next Classes – Nov. 9, 2005 • Prepare Chapters 13 and 14 • We will combine discussion of some fixed income markets so read ahead in Chapters 20 to 25 when you can • See me if you are having problems with group project