c hapter 8 l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
c hapter 8 PowerPoint Presentation
Download Presentation
c hapter 8

Loading in 2 Seconds...

play fullscreen
1 / 27

c hapter 8 - PowerPoint PPT Presentation


  • 419 Views
  • Uploaded on

c hapter 8. foreign exchange and international financial markets. Chapter Objectives 1. Describe how demand and supply determine the price of foreign exchange Discuss the role of international banks in the foreign-exchange market

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 'c hapter 8' - shing


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
c hapter 8

chapter 8

foreign exchange and international financial markets

chapter objectives 1
Chapter Objectives 1
  • Describe how demand and supply determine the price of foreign exchange
  • Discuss the role of international banks in the foreign-exchange market
  • Assess the different ways firms can use the spot and forward markets to settle international transactions

8-2

chapter objectives 2
Chapter Objectives 2
  • Summarize the role of arbitrage in the foreign-exchange market
  • Discuss the important aspects of the international capital market

8-3

foreign exchange
Foreign Exchange

Foreign exchange is a commodity that consists of currencies issued by countries other than one’s own.

8-4

figure 8 1 demand for yen
Figure 8.1 Demand for Yen

Demand for Japanese Yen is Derived from Foreigner’s Demand for Japanese Products

8-5

figure 8 2 supply of yen
Figure 8.2 Supply of Yen

Supply for Japanese Yen is Derived from Japanese Demand for Foreign Products

8-6

foreign exchange rates
Foreign-Exchange Rates
  • Direct exchange rate
    • Direct quote
    • Price of the foreign currency in terms of home currency
  • Indirect exchange rate
    • Indirect quote
    • Price of the home country in terms of the foreign currency

8-8

foreign exchange trading
Foreign-Exchange Trading

The Chinese foreign-exchange trader is an important link in the $1.9 trillion-per-day global exchange market.

8-11

the role of banks
The Role of Banks
  • Buy or sell major traded currencies
  • Markets
    • Wholesale market
    • Retail market

8-13

bank foreign exchange clients
Bank Foreign Exchange Clients

Commercial customers

Speculators

Arbitrageurs

8-14

mechanisms for future foreign exchanges
Mechanisms for Future Foreign Exchanges
  • Currency future
  • Currency option
    • Call option
    • Put option

8-16

arbitrage
Arbitrage

Arbitrage is the riskless purchase of a product in one market for immediate resale in a second market in order to profit from a price discrepancy. There are two types of arbitrage activities that affect the foreign-exchange market: arbitrage of goods and arbitrage of money.

8-17

arbitrage18
Arbitrage

Arbitrage

of Goods

Arbitrage

of Money

8-18

arbitrage of money
Arbitrage of Money

Two-point

Three-point

Covered-interest

8-19

table 8 1 the world s largest banks
Citigroup

Fortis

Credit Agricole

HSBC Holdings

BNP paribas

UBS

Bank of America

J.P. Morgan & Chase Co.

Deutsche Bank

HBOS

Table 8.1 The World’s Largest Banks

8-21

establishment of overseas banking operations
Establishment of Overseas Banking Operations

Subsidiary bank

Branch bank

Affiliated bank

8-22

the eurocurrency market
The Eurocurrency Market
  • Originated in the early 1950s
  • Eurodollars – U.S. dollars deposited in European bank accounts
    • Euroyen
    • Europounds
  • Eurocurrency – currency on deposit outside in banks worldwide
  • Euroloans quoted on basis of LIBOR

8-23

the international bond market
The International Bond Market
  • Major source of debt financing for
    • World’s governments
    • International organizations
    • Larger firms
  • Two types of bonds
    • Foreign bonds
    • Eurobonds

8-24

global equity markets
Global Equity Markets
  • Start-up companies are no longer restricted to raising new equity only from domestic sources
  • Development of country funds
    • Mutual fund specializing in a given country’s funds

8-26

offshore financial centers
Offshore Financial Centers
  • Focus on offering banking and other financial services to nonresident customers
  • Locations
    • Bahamas, Bahrain, the Cayman Islands, Bermuda, the Netherlands Antilles, Singapore, Luxembourg, Switzerland

8-27