International Finance. Lecture 4. International Finance. Course topics Foundations of International Financial Management World Financial Markets and Institutions Foreign Exchange Exposure Financial Management for a Multinational Firm. World Financial Markets and Institutions.
Leverage Ratio = Equity Capital/Assets
Well ___________: a bank’s leverage ratio must exceed 5%.
Is First Bank well capitalized?
1st category: zero weight, reserves and government securities in OECD countries
2nd category: 20% weight, claims on banks in OECD countries
3rd category: 50% weight, municipal bonds and residential mortgages
4th category: 100% weight, debts of consumers and corporations
Off-balance-sheet activities are treated in a similar manner
Banks must hold as capital at least 8% of their risk-weighted assets.
Comparison of US lending and borrowing rates with Eurodollar rates on August 19, 2002
FT1T2 = (RT2*T2-RT1*T1)/(T2-T1)
Since forward rate > reference rate, expected discounted value of the payoff = ___________
To buy FRA with such specifications, the buyer would have to pay to the seller ___________as the seller is facing the discounted expected need to make a payment of this amount of money to the buyer
Ten Biggest American Bank Lenders to Mexico
($bn, September 30th, 1987)
LDC firm or MNC subsidiary
Equity Investor or MNC
LDC Central Bank