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Understanding Money Market Instruments and International Trade Transactions

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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Understanding Money Market Instruments and International Trade Transactions

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  1. The Money Market and Money-Market Instruments (2) Week 11 – November 2, 2005

  2. 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

  3. Corporations in Money Market

  4. Evolution of Commercial Paper

  5. 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

  6. Bankers’ Acceptances Market

  7. Eurocurrency • History of the market • Reasons for the market • Interest rate regulation • Deposit creation • Flexibility • Eurodollars and other currencies

  8. 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

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