International Financial Markets
Essay Preview: International Financial Markets
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International Financial Markets .Within the context of the multinational firm, the course examines the development of policy; financing options for international business; and the making of standard financial management decisions.
The forces of globalization and its implications for the multinational firm.
* The operation of the international financial system, its current state, challenges for the future.
* Different types of foreign exchange exposure faced by the MNC.
* The structure of international financial markets and institutions, the range of
instruments traded therein.
* Financial management decision of multinational firms differ from those operations.
There are several terms that you need to understand before moving further in this course.
Foreign currency exchange rate is the price of one countrys currency in units of another currency or commodity.
Spot exchange rate is the quoted price for foreign exchange to be delivered at once, or in two days for interbank transactions.
Forward rate is the quoted price for foreign exchange to be delivered at a specified date in the future.
Forward premium or discount is the percentage difference between the spot and forward exchange rate.
Devaluation of a currency refers to a drop in foreign exchange value of a currency that is pegged to gold or to another currency.
Weakening, deterioration, or depreciation of a currency refers to a drop in the foreign exchange rate that is pegged to gold or to another currency.
Soft or weak describes a currency that is expected to devalue or depreciate relative to major currencies. It also refers to currencies whose values are being artificially sustained by their governments.
Eurocurrencies are sometimes viewed as another kind of money, although in reality they are domestic currencies of one country on deposit in a second country. Their value is identical to that of the same currency at home.