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国际金融英文版PPT CH4

The Classical Gold Standard (1876 – 1914)

The gold standard was a commitment by participating nations to fix the price of their domestic currencies in terms of a specified amount of gold. The government announces the gold par value which is the amount of its currency needed to buy one ounce of gold. Therefore, the gold was the international currency under the gold standard.
Exports rise Imports shrink
BOP surpluses Gold inflows
BOP deficits Gold outflows
Exports decline Imports increase
Money supply up Prices up
Performance of the gold standard

Gold Standard and Exchange Values

Pegging the value of each currency to gold established an exchange rate system. The gold par value determined the exchange rate between two currencies known as “mint par of exchange”

国际金融英文版PPT(共46页)

The exchange rate would fluctuate between (0.80 + 0.008) = 0.8008 and (0.80 – 0.008) = 0.792
0.8008 and 0.792 are called gold export and import points.
The BOP disequilibrium was corrected by “Price-specie-flow mechanism”.
Example of gold export and import
If the gold par value in New Zealand was NZ$125/ounce and A$100/ounce in Australia, so mint par of exchange: 100/125 = A$0.80/NZ$ Costs of gold transportation: A$0.008/NZ$
The Classical Gold Standard (1876 – 1914)
The gold standard was a commitment by participating nations to fix the price of their domestic currencies in terms of a specified amount of gold.
International monetary system is based on the exchange rate system adopted by individual nations. The exchange rate system is a set of rules governing the value of a currency relative to other currencies.

国际金融英文版课后答案

International Finance 国际金融Notes to the ans wers:1、All the terms can be found in the text.2、The discussions can be attained by reading the original text.Chapter 1Answers:II. T T F F F T TIII. 1. reserve currency 2. appreciate 3. was pegged to 4. deficit 5. fixed exchange rates 6. floating exchange rates 7. depreciate 8. market forcesIV. 1. Confidence in the ability of the U.S. to redeem dollars for gold began to fall as potential claims against the dollar increased and U.S. gold reserves fell.2.Under the fixed exchange rate system, the value of the dollar was tied to gold through itsconvertibility in to gold at the U.S. Treasury, and other nations’ currencies were tied to the dollar by the maintenance of a fixed rate of exchange.3.IMF has adjusted its role in the exchange rate system in view of the development of thesituation.4.After the collapse of the Bretton Woods System, the task of ―rigorous monitoring‖theexchange rate policy of member countries fell on the shoulder of IMF.5.Under normal conditions the stabilizing operations were sufficient to contain short-runfluctuations in a currency’s price within the required bounds of 1% of par value and thereby maintain a system of fixed exchange rates.Chapter 2Answers:I. liquid, turnover, due to, hedge, cross trading, electronic broking, outright forwards,Over-the-counter, futures and options, derivatives, remainder.II.. 1. The fundamental changes occurred in post-war world economy. The international flow of commodities, capital and labor is intensifying, thus leading to integration of international markets.1.Often referred to as ―financial institutions with a soul‖, credit unions are member-ownedcooperatives that offer checking accounts, savings accounts, credit cards, and consumer loans.2.If you think the price of gold will rise, you can buy a most simple kind of financial derivativewhich is called ―futures‖. If by that time the price really goes up, then you make a gain. But if you make a wrong guess and the price declines, then you suffer a loss.3.Financial derivatives are financial commodities deriving from such spot market products asinterest rate or bond, foreign exchange or foreign exchange rate and sto ck or stock indexes.There are mainly three types of derivatives: futures, options and swaps, each of which involves a mix of financial contracts.panies and investment funds are using basic currency futures and currency options, onesthat are regarded as traditional hedging products for investors who want to protect their international assets from sharp gains and declines in currency prices.Chapter 3Answers：II. 1. deposit accounts 2. securitization 3. Deregulation 4. consolidation 5. portfolio 6. thrift institutions 7. listing 8. liquidity 9. banking supervision 10. Credit riskIII. 1. Depository institutions 2. commercial banks 3. credit analysis 4. working capital 5. consolidation 6. financing 7. moral hazard 8. Bank supervision and regulation 9. Credit risk 10. Liquidity riskIV. 1. If a bank’s base rate was below money market rates, a customer could borrow from a bank and lend these funds to the money market, thus making a profit on the deal.2.Financing of international trade is one of the basic functions of a commercial bank. Not onlydoes it father deposits (demand, time and savings accounts), but it also grants loans.3.If you have a credit card, you buy a car, eat a dinner, take a trip,a nd even get a haircut bycharging the cost to your account.4.As the central bank and under the leadership of the State Council, the People’s Bank ofChina will formulate and implement monetary policies, execute supervision and control power over the banking industry.5.One of major function of the central bank is the supervision of the clearing mechanis m. Areliable clearing mechanis m which can settle inter-bank transaction with high efficiency is crucial to a well-operated financial system.Chapter 4 Ans wers:II. 1．integrity 2. pretext 3. released 4. produce 5. facilities 6. obliged 7. alleging 8. Claims 9. cleared 10. deliveryIII. 1. in favor of 2. consignment 3. undertaking, terms and conditions 4. cleared 5. regardless of 6. obliged to 7. undervalue arrangement 8. on the pretext of 9. refrain from 10. hinges onIV. 1. The objective of documentary credits is to facilitate international payment by making use of the financial expertise and credit worthiness of one or more banks.2.In compliance with your request, we have effected insurance on your behalf and debited youraccount with the premium in the amount of $1000.3.When an exporter is trading regularly with an importer, he will offer open account terms.4.Exporters usually insist on payment by cash in advance when they are trading with oldcustomers.5.Cash in advance means that the exporter is paid either when the importer places his order orwhen the goods are ready for shipment.Chapter 5.II．1. b 2. c 3. c 4. a 5. b 6. b 7. a 8. cIII. 1. guaranteed 2. without recourse 3. defaults 4. on the buyer’s account 5. is equivalent to 6. in question 7. devaluation 8. validity 9. discrepancy 10. inconsistent withChapter 6Answers:II. 1. open account, creditworthiness 2. demand 3. draw on, creditor 4. protest 5. schedule, discrepancies 6. acceptance 7. drawee 8. guranteedIII. 1. collecting bank 2. tenor 3. the proceeds 4. protest 5. deferred payment 6. presentation 7. the maturity date 8. a document of title 9. the shipping documents 10. transshipmentIV. 1. Documentary collection is a method by which the exporter authorizes the bank to collect money from the importer.2.When a draft is duly presented for acceptance or payment but the acceptance or paymentis refused, the draft is said to be dishonored.3.In the international money market, draft is a circulative and transferable instrument.Endorsement serves to transfer the title of a draft to the transferee.4.A clean bill of lading is favored by the buyer and the banks for financial settlementpurposes.5.Parcel post receipt is issued by the post office for goods sent by parcel post. It is both areceipt and evidence of dispatch and also the basis for claim and adjustment if there is any damage to or loss of parcels.Chapter 7II. financing, discounting, factoring, forfaiting, without recourse, accounts receivable, factor, trade obligations, promissory notes, trade receivables, specialized.III. 1. a cash flow disadvantage 2. without recourse 3. negotiable instruments 4. promissory notes 5. profit margin 6. at a discount, maturity, credit risk 7. A bill of exchange, A promissory noteIV. 1. When a bill is dishonored by non-acceptance or by non-payment, the holder then has an immediate right of recourse against the drawer and the endorsers.2.If a bill of lading is made out to bearer, it can be legally transferred without endorsement.3.The presenting bank should endeavor to ascertain the reasons non-payment ornon-acceptance and advise accordingly to the collecting bank.4.Any charges and expenses incurred by banks in connection with any action for protection o fthe goods will be for the account of the principal.5.Anyone who has a current account at a bank can use a cheque.Chapter EightStructure of the Foreign Exchange Market外汇市场的构成1. Key Terms1）foreign exchange：―Foreign exchange‖ refers t o money denominated in the currency of another nation or group of nations.2）payment“payment”is the transmission of an instruction to transfer value that results from a transaction in the economy.3）settlement―settlement‖ is the final and uncondit ional transfer of the value specified in a payment instruction.2. True or False1) true 2) true 3) true 4) true1)Tell the reasons why the dollar is the market's most widely tradedcurrency?key points: U.S.A economic background; the leadership of USD in the world economy ; the role it plays in investment , trade, etc.2)What kind of market is the foreign exchange market?Make reference to the following parts:（8.7 The Market Is Made Up of An International Network of Dealers）Chapter 9Instruments交易工具1. Key Terms1) spot transactionA spot transaction is a straightforward (or ―outright‖) exchange of one currency for another. The spot rate is the current market price, the benchmark price.Spot transactions do not require immediate settlement, or payment ―on the spot.‖ By convention, the settlement date, or ―value date,‖is the second business day after the ―deal date‖ (or ―trade date‖) on which the transaction is agreed to by the two traders. The two-day period provides ample time for the two parties to confirm the agreement and arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.2) American termsThe phrase ―American terms‖means a direct quote from the point of view of someone located in the United States. For the dollar, that means that the rate is quoted in variable amounts of U.S. dollars and cents per one unit of foreign currency (e.g., $1.2270 per Euro).3) outright forward transactionAn outright forward transaction, like a spot transaction, is a straightforward single purchase/ sale of one currency for another. The only difference is that spot is settled, or delivered, on a value date no later than two business days after the deal date, while outright forward is settled on any pre-agreed date three or more business days after the deal date. Dealers use the term ―outright forward‖ to make clear that it is a single purchase or sale on a future date, and not part of an ―FX swap‖.4) FX swapAn FX swap has two separate legs settling on two different value dates, even though it is arranged as a single transaction and is recorded in the turnover statistics as a single transaction. The two counterparties agree to exchange two currencies at a particular rate on one date (the ―near date‖) and to reverse payments, almost always at a different rate, on a specified sub sequent date (the ―far date‖). Effectively, it is a spot transaction and an outright forward transaction going in opposite directions, or else two outright forwards with different settlement dates, and going in opposite directions. If both dates are less than one month from the deal date, it is a ―short-dated swap‖; if one or both dates are one month or more from the deal date, it is a ―forward swap.‖5) put-call parity―Put-call parity‖says that the price of a European put (or call) option can be deduced from the price of a European call (or put) option on the same currency, with the same strike price and expiration. When the strike price is the same as the forward rate (an ―at-the-money‖forward), the put and the call will be equal in value. When the strike price is not the same as the forward price, the difference between the value of the put and the value of the call will equal the difference in the present values of the two currencies.2. True or False1) true 2) true 3) true3. Cloze1) Traders in the market thus know that for any currency pair, if the basecurrency earns a higher interest rate than the terms currency, the currency will trade at a forward discount, or below the spot rate; and if the base currency earns a lower interest rate than the terms currency, the base currency will trade at a forward premium, or above the spot rate. Whichever side of the transaction the trader is on, the trader won't gain (or lose) from both the interest rate differential and the forward premium/discount. A trader who loses on the interest rate will earn the forward premium, and vice versa.2) A call option is the right, but not the obligation, to buy the underlyingcurrency, and a put option is the right, but not the obligation, to sellthe underlying currency. All currency option trades involve two sides—the purchase of one currency and the sale of another—so that a put to sell pounds sterling for dollars at a certain price is also a call to buy dollars for pounds sterling at that price. The purchased currency is the call side of the trade, and the sold currency is the put side of the trade. The party who purchases the option is the holder or buyer, and the party who creates the option is the seller or writer. The price at which the underlying currency may be bought or sold is the exercise , or strike, price. The option premium is the price of the option that the buyer pays to the writer. In exchange for paying the option premium up front, the buyer gains insurance against adverse movements in the underlying spot exchange rate while retaining the opportunity to benefit from favorable movements. The option writer, on the other hand, is exposed to unbounded risk—although the writer can (and typically does) seek to protect himself through hedging or offsetting transactions.4. Discussions1)What is a derivate financial instrument? Why is traded?2)Discuss the differences between forward and futures markets in foreigncurrency.3)What advantages do foreign currency futures have over foreigncurrency options?4)What is meant if an option is ―in the money‖, ―out of the money‖,or ―atthe money‖?5)What major international contracts are traded on the ChicagoMercantile Exchange ? Philadelphia Stock Exchange?Chapter 10Managing Risk in Foreign Exchange Trading外汇市场交易的风险管理1. Key Terms1) Market riskMarket risk, in simplest terms, is price risk, or ―exposure to (adverse)price change.‖ For a dealer in foreign exchange, two major elements of market risk are exchange rate risk and interest rate risk—that is, risks of adverse change in a currency rate or in an interest rate.2) VARVAR estimates the potential loss from market risk across an entire portfolio, using probability concepts. It seeks to identify the fundamental risks that the portfolio contains, so that the portfolio can be decomposed into underlying risk factors that can be quantified and managed. Employing standard statistical techniques widely used in other fields, and based in part on past experience, VAR can be used to estimate the daily statistical variance, or standard deviation, or volatility, of the entire portfolio. On the basis of that estimate of variance, it is possible to estimate the expected loss from adverse price movements with a specified probability over a particular period of time (usually a day).3) credit riskCredit risk, inherent in all banking activities, arises from the possibility that the counterparty to a contract cannot or will not make the agreed payment at maturity. When an institution provides credit, whatever the form, it expects to be repaid. When a bank or other dealing institution enters a foreign exchange contract, it faces a risk that the counterparty will not perform according to the provisions of the contract. Between the time of the deal and the time of thesettlement, be it a matter of hours, days, or months, there is an extension of credit by both parties and an acceptance of credit risk by the banks or other financial institutions involved. As in the case of market risk, credit risk is one of the fundamental risks to be monitored and controlled in foreign exchange trading.4) legal risksThere are legal risks, or the risk of loss that a contract cannot be enforced, which may occur, for example, because the counterparty is not legally capable of making the binding agreement, or because of insufficient documentation or a contract in conflict with statutes or regulatory policy.2. True or False1)True 2) true3. Translation1) Broadly speaking, the risks in trading foreign exchange are the same asthose in marketing other financial products. These risks can be categorized and subdivided in any number of ways, depending on the particular focus desired and the degree of detail sought. Here, the focus is on two of the basic categories of risk—market risk and credit risk (including settlement risk and sovereign risk)—as they apply to foreign exchange trading. Note is also taken of some other important risks in foreign exchange trading—liquidity risk, legal risk, and operational risk2) It was noted that foreign exchange trading is subject to a particular form ofcredit risk known as settlement risk or Herstatt risk, which stems in part from the fact that the two legs of a foreign exchange transaction are often settled in two different time zones, with different business hours. Also noted was the fact that market participants and central banks have undertaken considerable initiatives in recent years to reduce Herstatt risk.4. Discussions2)Discuss the way how V AR works in measuring and managing marketrisk?3)Why are banks so interested in political or country risk?4)Discuss other forms of risks which you know in foreign exchange. Chapter 11The Determination of Exchange Rates汇率的决定1. Key Terms1) PPPPurchasing Power Parity (PPP) theory holds that in the long run, exchange rates will adjust to equalize the relative purchasing power of currencies. This concept follows from the law of one price, which holds that in competitive markets, identical goods will sell for identical prices when valued in the same currency.2) the law of one priceThe law of one price relates to an individual product. A generalization of that law is the absolute version of PPP, the proposition that exchange rates will equate nations' overall price levels.3) FEER―fundamental equilibrium exchange rate,‖ or FEER,envisaged as the equilibrium exchange rate that would reconcile a nation's internal and external balance. In that system, each country would commit itself to a macroeconomicstrategy designed to lead, in the medium term, to ―internal balance‖—defined as unemployment at the natural rate and minimal inflation—and to ―external balance‖—defined as achieving the targeted current account balance. Each country would be committed to holding its exchange rate within a band or target zone around the FEER, or the level needed to reconcile internal and external balance during the intervening adjustment period.4) monetary approachThe monetary approach to exchange rate determination is based on the proposition that exchange rates are established through the process of balancing the total supply of, and the total demand for, the national money in each nation. The premise is that the supply of money can be controlled by the nation's monetary authorities, and that the demand for money has a stable and predictable linkage to a few key variables, including an inverse relationship to the interest rate—that is, the higher the interest rate, the smaller the demand for money.5) portfolio balance approachThe portfolio balance approach takes a shorter-term view of exchange rates and broadens the focus from the demand and supply conditions for money to take account of the demand and supply conditions for other financial assets as well. Unlike the monetary approach, the portfolio balance approach assumes that domestic and foreign bonds are not perfect substitutes. According to the portfolio balance theory in its simplest form, firms and individuals balance their portfolios among domestic money, domestic bonds, and foreign currency bonds, and they modify their portfolios as conditions change. It is the process of equilibrating the total demand for, and supply of, financial assets in each country that determines the exchange rate.2. True or False1) true 2) true3. Cloze1）PPP is based in part on some unrealistic assumptions: that goods are identical; that all goods are tradable; that there are no transportationcosts, information gaps, taxes, tariffs, or restrictions of trade; and—implicitly and importantly—that exchange rates are influenced only byrelative inflation rates. But contrary to the implicit PPP assumption,exchange rates also can change for reasons other than differences ininflation rates. Real exchange rates can and do change significantly overtime, because of such things as major shifts in productivitygrowth, advances in technology, shifts in factor supplies, changes inmarket structure, commodity shocks, shortage, and booms.2）Each individual and firm chooses a portfolio to suit its needs, based on a variety of considerations—the holder's wealth and tastes, the level ofdomestic and foreign interest rates, expectations of future inflation,interest rates, and so on. Any significant change in the underlying factorswill cause the holder to adjust his portfolio and seek a new equilibrium.These actions to balance portfolios will influence exchange rates.4. Discussions1）How does the purchasing power parity work?2）Describe and discuss one model for forecasting foreign exchange rates.3）Make commends on how good are the various approaches mentioned in the chapter.4）Central banks occasionally intervene in foreign exchange markets. Discuss the purpose of such intervention. How effective is intervention?Chapter 12The Financial Markets金融市场1. Key Terms1）money marketThe money market is really a market for short-term credit, or the option to use someone else's money for a period of time in return for the payment of interest. The money market helps the participants in the economic process cope with routine financial uncertainties. It assists in bridging the differences in the timing of payments and receipts that arise in a market economy.2）capital marketMarkets dealing in instruments with maturities that exceed one year are often referred to as capital markets.3）primary marketThe term ―primary market‖ applies to the original issuance of a credit market instrument. There are a variety of techniques for such sales, including auctions, posting of rates, direct placement, and active customer contacts by a salesperson specializing in the instrument4） secondary marketOnce a debt instrument has been issued, the purchaser may be able to resell it before maturity in a ―secondary market.‖ Again, a number of techniques are available for bringing together potential buyers and sellers of existing debt instruments. They include various types of formal exchanges, informal telephone dealer markets, and electronic trading through bids and offers on computer screens. Often, the same firms that provide primary marketing services help to create or ―make‖ secondary markets.5）RPsIn addition to making outright purchases and sales in the secondary market, entities with money to invest for a brief period can acquire a security temporarily, and holders of debt instruments can borrow short term by selling securities temporarily. These two types of transactions are repurchase agree-ments (RPs) and reverse RPs,respectively. In the wholesale market, banks and government securities dealers offer RPs at competitive rates of return by selling securities under contracts providing for their repurchase from one day to several months later6）BAs 7）CDs (reference to 13.1)8） EurodollarEurodollars are U.S. dollar deposits at banking offices in a country other than the United States.9） EurobankEurobanks—banks dealing in Eurodollar or some other nonlocal currency deposits, including foreign branches of U.S. banks— originally held deposits almost exclusively in Europe, primarily London. While most such deposits are still held in Europe, they are also held in such places as the Bahamas, Bahrain, Canada, the Cayman Islands, Hong Kong, Singapore, and Tokyo, as well as other parts of the world.10）LIBOR (reference to 13.2.2 Certificates of Deposit)London inter-bank offer rate11）mortgage-backed securities12）Eurobond market (details make reference to13.3.3 )The Eurobond market, centered in London, is an offshore market in intermediate- and long-term debt issues. It serves as a source of capital for multinational corporations and for foreign governments. It developed after the United States instituted the interest equalization tax in 1963 to stem capital outflows inspired by relatively low U.S. interest rates.2. True or False1) true 2) true 3) true3. Discussions1) Describe the characteristics of Interest Rate Swap and the role of it in thebank-related financial market.2) What risks are encountered in the swaps markets?3) Discuss one or two specific examples of derivative products and their use.4. Translations1) Markets dealing in instruments with maturities that exceed one year are often referred to as capital markets, since credit to finance investments in new capital would generally be needed for more than one year. The time division is arbitrary. A long-term project can be started with short-term credit, with additional instruments may need to be renewed before a project is completed. Debt instruments that differ in maturity share other characteristics. Hence, the term ―capital market‖ could be –and occasionally is applied to some shorter maturity transactions.2) The secondary market for Treasure securities consists of a network of dealers, brokers, and investors who effect transactions either by telephone or electronically. Telephone trades are generally between dealers and their customers. Electronics trading is arranged through screen-based systems provided by some of the dealers to their customers. It allows selected trades to take place without a conversation. When dealers trade with each other, they generally use brokers. Brokers provide information on screen, but the final trades are made bytelephone.Chapter 13Concepts of Financial Assets Value金融资产价值的概念1. Key Terms1) absolute measure of valueAn absolute measure of value is used when one must compare it to a nominal amount: purchase price, amount to invest, target sum of money to raise2) relative measure of valueA relative measure of rate of return is more convenient to use when one wishes to compare one financial asset to a set of numerous alternative assets. A rate of return is the most commonly used relative measure of value.3) discountingFuture benefits must be discounted (or converted) to their present (or today's) value, before they are summed. Discounting is part of the study of time value of money, or actuarial mathematics, and a complete treatment of it can be found in specialized textbook.4) time value of moneyTime value of money studies how amounts of money are made equivalent over time. Converting amounts today into their future equivalent consists in adding interest to principal, i.e. compounding. Converting amounts in the future into today's equivalent consists of charging an interest, i.e. discounting. Thus, discounting is the exact inverse of compounding.5) FV 6) PV 7) annuity8) short term securitiesShort term securities (i.e. securities with maturity less than one year) are sold at a discount (i.e. nominal value less the interest to be earned over the remaining number of days to maturity). There is no coupon, and no additional benefits such as conversion right, but there may be a penalty for early redemption in the case of some bank certificates of deposit.9) P/E ratio (make reference to 15.5.3 --Earnings Multiple or P/E Ratio)Another approach which is used as a short-cut by a large number of investors, is the earnings multiple. It is sometimes referred to as earningsmultiplier, and it is most commonly known as price-to-earnings or P/E ratio. In many instances, the approach, rather than being an oversimplification, can be an improvement over the previous format. In its most common presentation, the idea is that the price P of a share should be a multiple m of its earnings per share E. The multiple m is an industry average because it is assumed that all companies in an industry face similar marketing, technological and resource challenges, and thus, should have similar organizational and production patterns.10) intrinsic valueintrinsic value, or difference between market price of the underlying stock and strike price (which is also known as exercise price because it is the price at which an option holder can buy from or sell to the option writer the underlying stock through the options exchange)。

International finance chapter3 (国际金融英文版课件)

A forward rate is a rate applicable to a financial transaction that will take place in the future.

The Bid rate is the rate at which you can sell. The Ask (or offer) rate is the rate at which you can buy. Bid/Ask Spread The difference between the bid and ask prices. In thinly traded markets, this spread may be wide. The mean is the average of bid and ask rate. The cash rate is the exchange rate used in cash transaction.
THE BASICS OF CURRENCY TRADING

Multiple exchange rates The system by which a country's currency has more than one exchange rate with any foreign currency. The rate which applies to any transaction may depend on the holder of the currency, or on the purpose for which it is being used.
THE BASICS OF CURRENCY TRADING

国际金融英文版(全)

International financial markets
Eurocurrency markets International debts markets-long-term global bonds/foreign bonds/eurobonds/special types of bonds Short-and medium-term debt markets Euro-commercial paper and euro-medium-term notes/floating rate euro-notes International equities
Non-bank financial institutions in global finance International financial markets International derivatives exchange-traded International non-exchange traded derivatives
the balance of payment
3.the theories of foreign exchange rate determination 4.foreign exchange exposure
4.nonexchange traded derivatives
Inventory of international financial resources Yu feng yao

Foreign bonds-foreign bonds are issued in local market by a foreign borrower,with the assistance of a large investment bankers,and are denominated in a local currency. Eurobonds-eurobonds are financed by long-term funds in the Eurocurrency markets.They are underwritten by a multinational syndicate of banks and placed in countries other than the one in whose currency they are denominated.

(完整word版)英文版国际金融试题和答案

PartⅠ.Decide whether each of the following statements is true or false (10%)每题1分, 答错不扣分1.I.perfec.market.existed.resource.woul.b.mor.mobil.an.coul.therefor.b.transferre.t.thos.countrie.mor.willin.t.pa..hig.pric.fo.them.. .. .2.Th.forwar.contrac.ca.hedg.futur.receivable.o.payable.i.foreig.currencie.t.insulat.th.fir.agains.exchang.rat.risk ... . )3.Th.primar.objectiv.o.th.multinationa.corporatio.i.stil.th.sam.primar.objectiv.o.an.firm.i.e..t.maximiz.sharehol de.wealth.. .. )4..lo.inflatio.rat.tend.t.increas.import.an.decreas.exports.thereb.decreasin.th.curren.accoun.deficit.othe.thing.e qual......5..capita.accoun.defici.reflect..ne.sal.o.th.hom.currenc.i.exchang.fo.othe.currencies.Thi.place.upwar.pressur.o.tha.hom.currency’.value.. .. )parativ.advantag.implie.tha.countrie.shoul.specializ.i.production.thereb.relyin.o.othe.countrie .fo.som.products.. .. .7.Covere.interes.arbitrag.i.plausibl.whe.th.forwar.premiu.reflec.th.interes.rat.differentia.betwee.tw.countrie.sp ecifie.b.th.interes.rat.parit.formula. .. . )8.Th.tota.impac.o.transactio.exposur.i.o.th.overal.valu.o.th.firm.. .. .9. .pu.optio.i.a.optio.t.sell-b.th.buye.o.th.option-.state.numbe.o.unit.o.th.underlyin.instrumen.a..specifie.pric.pe.uni.durin..specifie.period... . )10.Future.mus.b.marked-to-market.Option.ar.not.....)PartⅡ:Cloze (20%)每题2分, 答错不扣分1.I.inflatio.i..foreig.countr.differ.fro.inflatio.i.th.hom.country.th.exchang.rat.wil.adjus.t.maintai.equal.. purchasin.powe... ）2.Speculator.wh.expec..currenc.t..appreciat..... .coul.purchas.currenc.future.contract.fo.tha.currency.3.Covere.interes.arbitrag.involve.th.short-ter.investmen.i..foreig.currenc.tha.i.covere.b.....forwar.contrac...... .t. sel.tha.currenc.whe.th.investmen.matures.4.. Appreciation.Revalu....）petitio.i.increased.5.....PP... .suggest..relationshi.betwee.th.inflatio.differentia.o.tw.countrie.an.th.percentag.chang.i.th.spo.exchang.ra t.ove.time.6.IF.i.base.o.nomina.interes.rat....differential....).whic.ar.influence.b.expecte.inflation.7.Transactio.exposur.i..subse.o.economi.exposure.Economi.exposur.include.an.for.b.whic.th.firm’... valu... .wil.b.affected.modit.a..state.pric.i..... pu..optio..i.exercised9.Ther.ar.thre.type.o.long-ter.internationa.bonds.The.ar.Globa.bond. .. eurobond.....an....foreig.bond...).10.An.goo.secondar.marke.fo.financ.instrument.mus.hav.a.efficien.clearin.system.Mos.Eurobond.ar.cleare.thr oug.eithe...Euroclea... ..o.Cedel.PartⅢ:Questions and Calculations (60%)过程正确结果计算错误扣2分rmation:A BankB BankBid price of Canadian dollar $0.802 $0.796Ask price of Canadian dollar $0.808 $0.800rmation.i.locationa.arbitrag.possible?put.t h.profi.fro.thi.arbitrag.i.yo.ha.$1,000,e.(5%)ANSWER:Yes! One could purchase New Zealand dollars at Y Bank for $.80 and sell them to X Bank for $.802. With $1 million available, 1.25 million New Zealand dollars could be purchased at Y Bank. These New Zealand dollars could then be sold to X Bank for $1,002,500, thereby generating a profit of $2,500.2.Assum.tha.th.spo.exchang.rat.o.th.Britis.poun.i.$1.90..Ho.wil.thi.spo.rat.adjus.i.tw.year.i.th.Unite.Kingdo.experience.a.inflatio.rat.o..percen.pe.yea.whil.th.Unite.State.experience.a.inflatio.rat.o..perc en. pe.year?(10%)ANSWER:According to PPP, forward rate/spot=indexdom/indexforth.exchang.rat.o.th.poun.wil.depreciat.b.4..percent.Therefore.th.spo.rat.woul.adjus.t.$1.9..[..(–.047)..$1.81073.Assum.tha.th.spo.exchang.rat.o.th.Singapor.dolla.i.$0.70..Th.one-yea.interes.rat.i.1.percen.i.th.Unite.State.a n..percen.i.Singapore..Wha.wil.th.spo.rat.b.i.on.yea.accordin.t.th.IFE?.(5%)ANSWER: according to the IFE,St+1/St=(1+Rh)/(1+Rf)$.70 × (1 + .04) = $0.7284.Assum.tha.XY.Co.ha.ne.receivable.o.100,00.Singapor.dollar.i.9.days..Th.spo.rat.o.th.S.i.$0.50.an.th.Singap or.interes.rat.i.2.ove.9.days..Sugges.ho.th.U.S.fir.coul.implemen..mone.marke.hedge..B.precis. .(10%)ANSWER: The firm could borrow the amount of Singapore dollars so that the 100,000 Singapore dollars to be received could be used to pay off the loan. This amounts to (100,000/1.02) = about S$98,039, which could be converted to about $49,020 and invested. The borrowing of Singapore dollars has offset the transaction exposure due to the future receivables in Singapore dollars.pan.ordere..Jagua.sedan.I..month..i.wil.pa.£30,00.fo.th.car.I.worrie.tha.poun.ster1in.migh.ris.sharpl.fro.th.curren.rate($1.90)pan.bough...mont.poun.cal.(suppose.contrac.siz..£35,000.wit..strik.pric.o.$1.9.fo..premiu.o.2..cents/£.(1)Is hedging in the options market better if the £ rose to $1.92 in 6 months?(2)what did the exchange rate have to be for the company to break even?（15%）Solution:(1)I.th..ros.t.$pan.woul. exercis.th.poun.cal.option.Th.su.o.th.strik.pric.an.premiu..i.$1.90 + $0.023 = $1.9230/£Thi.i.bigge.tha.$1.92.So hedging in the options market is not better.(2.whe.w.sa.th. compan.ca.brea.even.w.mea.tha.hedgin.o.no.hedgin.doesn’. matter.An.onl.whe.(strik.pric..premiu.).th.exchang.rat.,hedging or not doesn’t matter.So, the exchange rate =$1.923/£.6.Discus.th.advantage.an.disadvantage.o.fixe.exchang.rat.system.(15%)textbook page50 答案以教材第50 页为准PART Ⅳ: Diagram(10%)Th.strik.pric.fo..cal.i.$1.67/£.Th.premiu.quote.a.th.Exchang.i.$0.022.pe.Britis.pound.Diagram the profit and loss potential, and the break-even price for this call optionSolution:Following diagram shows the profit and loss potential, and the break-even price of this put option:PART Ⅴa) b) Calculate the expected value of the hedge.c) How could you replicate this hedge in the money market?Yo.ar.expectin.revenue.o.Y100,00.i.on.mont.tha.yo.wil.nee.t.cover.t.dollars.Yo.coul.hedg.thi.i.forwar.market.b.takin.lon.position.i.U.dollar.(shor.position.i.Japanes.Yen).B.lockin.i.you.pric.a.$..Y105.you.dolla.revenue.ar.guarantee.t.b.Y100,000/ 105 = $952You could replicate this hedge by using the following:a) Borrow in Japanb) Convert the Yen to dollarsc) Invest the dollars in the USd) Pay back the loan when you receive the Y100,000。

国际金融(英文版第二版)Chapter 1 Balance of Payment

The difference between direct investment and portfolio investment revolves around whether or not the investor intends to take an active role in the management of the enterprise the assets of which are being acquired
Chapter 1 Balance of payments
1.1 International transactions: the balance of payments
The
balance of payments is the record of the economics and financial flows that take place over a specified time period between residents and non-residents of a given country.
The current account
The
trade balance
services
The trade balance comprises merchandise exports and impocial services include such things as freight, insurance, passenger services and travel.
Table 1.1 Standard components of the balance of payments
Current
account Exports fob - Imports fob = Trade balance + Exports of non-financial services - Imports of non-financial services + Investment income (credit) - Investment income (debit) +(-) Private unrequited transfers +(-) Official unrequited transfers = Current account balance Capital account +(-) Direct investment +(-) Portfolio investment +(-) Other long-term capital +(-) Other short-term capital +(-) Net errors and omissions +(-) Counterpart items +(-) Total change in reserves = Capital account balance

罗伯特J凯伯《国际金融》(第十三版英文版)课件

• Settled with international reserves
• Enable nations to sustain temporary balanceof-payments deficits
• Until acceptable adjustment measures can operate to correct the disequilibrium
• The smaller and more short-lived market imbalances will be and • The fewer reserves will be needed
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password‐protected website for classroom use
International Banking: Reserves, Debt, and Risk
PowerPoint slides prepared by: Andreea Chiritescu Eastern Illinois University
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password‐protected website for classroom use

国际金融英文版CH3

Foreign exchange rate quotations on the U.S.
Dollar/British Pound in the Financial Press
An exchange of currencies involves two currencies. Either of which may be placed in the denominator. The quotation of the exchange rates follows conventions.
Convertibility means a currency can be freely exchanged for another currency. This is the most important characteristic of the foreign exchange.
Foreign exchange rate is the price of one currency in terms of another.
Spot Exchange Market and Exchange Rate Quotations
The spot exchange market is a market that deals in foreign exchange for immediate delivery. Immediate delivery in foreign currencies usually means within two business days.
A spot exchange rate is the current market price, the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

国际金融英文版课后答案

International Finance 国际金融Notes to the answers:1、All the terms can be found in the text.2、The discussions can be attained by reading the original text.Chapter 1Answers:II. T T F F F T TIII. 1. reserve currency 2. appreciate 3. was pegged to 4. deficit 5. fixed exchange rates 6. floating exchange rates 7. depreciate 8. market forcesIV. 1. Confidence in the ability of the U.S. to redeem dollars for gold began to fall aspotential claims against the dollar increased and U.S. gold reserves fell.2.Under the fixed exchange rate system, the value of the dollar was tied to goldthrough its convertibility in to gold at the U.S. Treasury, and other nations ’currencies were tied to the dollar by the maintenance of a fixed rate of exchange.3.IMF has adjusted its role in the exchange rate system in view of the development ofthe situation.4.After the collapse of the Bretton Woods System, the task of “rigorous monitoring ”theexchange rate policy of member countries fell on the shoulder of IMF.5.Under normal conditions the stabilizing operations were sufficient to contain short-runfluctuations in a currency ’s price within the required bounds of 1% of par value andthereby maintain a system of fixed exchange rates.Chapter 2Answers:I. liquid, turnover, due to, hedge, cross trading, electronic broking, outright forwards,Over-the-counter, futures and options, derivatives, remainder.II.. 1. The fundamental changes occurred in post-war world economy. The internationalflow of commodities, capital and labor is intensifying, thus leading to integration ofinternational markets.1.Often referred to as “financial institutions with a soul ”, credit unions aremember-owned cooperatives that offer checking accounts, savings accounts, creditcards, and consumer loans.2.If you think the price of gold will rise, you can buy a most simple kind of financialderivative which is called “futures ”. If by that time the price really goes up, then youmake a gain. But if you make a wrong guess and the price declines, then you suffer aloss.3.Financial derivatives are financial commodities deriving from such spot marketproducts as interest rate or bond, foreign exchange or foreign exchange rate and stock or stock indexes. There are mainly three types of derivatives: futures, optionsand swaps, each of which involves a mix of financial contracts.panies and investment funds are using basic currency futures and currencyoptions, ones that are regarded as traditional hedging products for investors who want to protect their international assets from sharp gains and declines in currencyprices.Chapter 3Answers ：II. 1. deposit accounts 2. securitization 3. Deregulation 4. consolidation 5. portfolio 6. thrift institutions 7. listing 8. liquidity 9. banking supervision 10. Credit riskIII. 1. Depository institutions 2. commercial banks 3. credit analysis 4. working capital 5.consolidation 6. financing 7. moral hazard 8. Bank supervision and regulation 9. Credit risk 10. Liquidity riskIV. 1. If a bank ’s base rate was below money market rates, a customer could borrow froma bank and lend these funds to the money market, thus making a profit on the deal.2. Financing of international trade is one of the basic functions of a commercial bank.Not only does it father deposits (demand, time and savings accounts), but it also grants loans.3. If you have a credit card, you buy a car, eat a dinner, take a trip,a nd even get ahaircut by charging the cost to your account.4. As the central bank and under the leadership of the State Council, the People ’s Bankof China will formulate and implement monetary policies, execute supervision and control power over the banking industry.5. One of major function of the central bank is the supervision of the clearing mechanism.A reliable clearing mechanism which can settle inter-bank transaction with highefficiency is crucial to a well-operated financial system.Chapter 4 Answers:I. 1 ．integrity 2. pretext 3. released 4. produce 5. facilities 6. obliged 7. alleging8. Claims 9. cleared 10. deliveryI. 1. in favor of 2. consignment 3. undertaking, terms and conditions 4. cleared 5. regardless of 6. obliged to 7. undervalue arrangement 8. on the pretext of 9. refrain from 10. hinges onI V. 1. The objective of documentary credits is to facilitate international payment by makinguse of the financial expertise and credit worthiness of one or more banks.2. In compliance with your request, we have effected insurance on your behalf anddebited your account with the premium in the amount of $1000.3. When an exporter is trading regularly with an importer, he will offer open accountterms.4. Exporters usually insist on payment by cash in advance when they are trading withold customers.5. Cash in advance means that the exporter is paid either when the importer places hisorder or when the goods are ready for shipment.Chapter 5.II．1. b 2. c 3. c 4. a 5. b 6. b 7. a 8. cIII. 1. guaranteed 2. without recourse 3. defaults 4. on the buyer ’s account 5. is equivalent to 6. in question 7. devaluation 8. validity 9. discrepancy 10. inconsistent withChapter 6Answers:II. 1. open account, creditworthiness 2. demand 3. draw on, creditor 4. protest 5. schedule, discrepancies 6. acceptance 7. drawee 8. guranteedIII. 1. collecting bank 2. tenor 3. the proceeds 4. protest 5. deferred payment 6. presentation 7. the maturity date 8. a document of title 9. the shipping documents 10. transshipmentIV. 1. Documentary collection is a method by which the exporter authorizes the bankto collect money from the importer.2. When a draft is duly presented for acceptance or payment but the acceptance orpayment is refused, the draft is said to be dishonored.3. In the international money market, draft is a circulative and transferableinstrument. Endorsement serves to transfer the title of a draft to the transferee.4. A clean bill of lading is favored by the buyer and the banks for financial settlementpurposes.5. Parcel post receipt is issued by the post office for goods sent by parcel post. It isboth a receipt and evidence of dispatch and also the basis for claim and adjustment if there is any damage to or loss of parcels.Chapter 7II. financing, discounting, factoring, forfaiting, without recourse, accounts receivable,factor, trade obligations, promissory notes, trade receivables, specialized.III. 1. a cash flow disadvantage 2. without recourse 3. negotiable instruments 4.promissory notes 5. profit margin 6. at a discount, maturity, credit risk 7. A bill ofexchange, A promissory noteIV. 1. When a bill is dishonored by non-acceptance or by non-payment, the holder t henhas an immediate right of recourse against the drawer and the endorsers.2. If a bill of lading is made out to bearer, it can be legally transferred withoutendorsement.3. The presenting bank should endeavor to ascertain the reasons non-payment ornon-acceptance and advise accordingly to the collecting bank.4. Any charges and expenses incurred by banks in connection with any action forprotection of the goods will be for the account of the principal.5. Anyone who has a current account at a bank can use a cheque.Chapter EightStructure of the Foreign Exchange Market外汇市场的构成1. Key Terms1）f oreign exchange ：“Foreign exchange ”refers to money denominated in the currency of another nation or group of nations.2）p ayment“payment ”is the transmission of an instruction to transfer value that results from a transaction in the economy.3）s ettlement“settlement ”is the final and unconditional transfer of the value specified ina payment instruction.2. True or False1) true 2) true 3) true 4) true3. Cloze1) The dollar is by far the most widely traded currency. In part, thewidespread use of the dollar reflects its substantial international roleas: “investment ”currency in many capital markets, “reserve ”currency held by many central banks, “transaction ”currency in many international commodity markets, “invoice ” currency i n many contracts, and “intervention ”currency employed by m onetary authorities in market operations to influence their own exchange rates.In addition, the widespread trading of the dollar reflects its use as a“vehicle ”currency in foreign exchange transactions, a use that reinforces, and is reinforced by, its international role in trade and finance.2）In foreign exchange trading, London benefits not only from its proximity to major Eurocurrency credit markets and other financial markets, but also from its geographical location and time zone. Inaddition to being open when the numerous other financial centers inEurope are open, London's morning hours overlap with the late hoursin a number of Asian and Middle East markets; London's afternoon sessions correspond to the morning periods in the large North American market. Thus, surveys have indicated that there is more foreign exchange trading in dollars in London than in the United States.4. Discussions1) Tell the reasons why the dollar is the market's most widely tradedcurrency?key points: U.S.A economic background; the leadership of USD inthe world economy ; the role it plays in investment , trade, etc.2) What kind of market is the foreign exchange market?Make reference to the following parts: （8.7 The Market Is Made Up of An International Network of Dealers ）Chapter 91. Key Terms1) spot transaction Instruments 交易工具A spot transaction is a straightforward (or “outright ”) exchange of one currency for another. The spot rate is the current market price, the benchmark price.Spot transactions do not require immediate settlement, or payment “on the spot. ”By convention, the settlement date, or “value date, ”is the second business day after the “deal date ”(or “trade date ”) on which the transaction is agreed to by the two traders. The two-day period providesample time for the two parties to confirm the agreement and arrange the clearing and necessary debiting and crediting of bank accounts in various international locations.2) American termsThe phrase “American terms ”means a direct quote from the point ofview of someone located in the United States. For the dollar, that meansthat the rate is quoted in variable amounts of U.S. dollars and cents perone unit of foreign currency (e.g., $1.2270 per Euro).3) outright forward transactionAn outright forward transaction, like a spot transaction, is a straightforward single purchase/ sale of one currency for another. The only difference is that spot is settled, or delivered, on a value date no later thantwo business days after the deal date, while outright forward is settled onany pre-agreed date three or more business days after the deal date. Dealers use the term “outright forward ”to make clear that it is a single purchase or sale on a future date, and not part of an “FX swap ”.4) FX swapAn FX swap has two separate legs settling on two different value dates,even though it is arranged as a single transaction and is recorded in the turnover statistics as a single transaction. The two counterparties agree to exchange two currencies at a particular rate on one date (the “near date ”) and to reverse payments, almost always at a different rate, on a specified subsequent date (the “far date ”). Effectively, it is a spot transaction and an outright forward transaction going in opposite directions, or else two outright forwards with different settlement dates, and going in opposite directions. If both dates are less than one month from the deal date, it is a “short-dated swap ”; if one or both dates are one month or more from thedeal date, it is a “forward swap. ”5) put-call parity“Put-call parity ”says that the price of a European put (or call) option canbe deduced from the price of a European call (or put) option on the same currency, with the same strike price and expiration. When the strike priceis the same as the forward rate (an “at-the-money ”forward), the put and the call will be equal in value. When the strike price is not the same as the forward price, the difference between the value of the put and the value ofthe call will equal the difference in the present values of the two currencies.2. True or False1) true 2) true 3) true3. Cloze1) Traders in the market thus know that for any currency pair, if thebase currency earns a higher interest rate than the terms currency, thecurrency will trade at a forward discount, or below the spot rate; and ifthe base currency earns a lower interest rate than the terms currency,the base currency will trade at a forward premium, or above the spotrate. Whichever side of the transaction the trader is on, the trader won't gain (or lose) from both the interest rate differential and the forward premium/discount. A trader who loses on the interest rate willearn the forward premium, and vice versa.2) A call option is the right, but not the obligation, to buy the underlyingcurrency, and a put option is the right, but not the obligation, to sell the underlying currency. All currency option trades involve two sides —the purchase of one currency and the sale of another —so thata put to sell pounds sterling for dollars at a certain price is also a call tobuy dollars for pounds sterling at that price. The purchased currency isthe call side of the trade, and the sold currency is the put side of thetrade. The party who purchases the option is the holder or buyer, andthe party who creates the option is the seller or writer. The price at which the underlying currency may be bought or sold is the exercise ,or strike, price. The option premium is the price of the option that thebuyer pays to the writer. In exchange for paying the option premium upfront, the buyer gains insurance against adverse movements in the underlying spot exchange rate while retaining the opportunity to benefit from favorable movements. The option writer, on the other hand, is exposed to unbounded risk —although the writer can (andtypically does) seek to protect himself through hedging or offsetting transactions.4. Discussions1) What is a derivate financial instrument? Why is traded?2) Discuss the differences between forward and futures markets inforeign currency.3) What advantages do foreign currency futures have over foreigncurrency options?4) What is meant if an option is “in the money ”, “out of the money ”,or “at the money ”?5) What major international contracts are traded on the ChicagoMercantile Exchange ? Philadelphia Stock Exchange?Chapter 101. Key Terms Managing Risk in Foreign Exchange Trading 外汇市场交易的风险管理1) Market riskMarket risk, in simplest terms, is price risk, or “exposure to (adverse) price change. ”For a dealer in foreign exchange, two major elements of market risk are exchange rate risk and interest rate risk —that is, risks of adverse change in a currency rate or in an interest rate.2) VARVAR estimates the potential loss from market risk across an entire portfolio, using probability concepts. It seeks to identify the fundamental risks that the portfolio contains, so that the portfolio can be decomposedinto underlying risk factors that can be quantified and managed. Employing standard statistical techniques widely used in other fields, and based in part on past experience, VAR can be used to estimate the daily statistical variance, or standard deviation, or volatility, of the entire portfolio. On thebasis of that estimate of variance, it is possible to estimate the expectedloss from adverse price movements with a specified probability over a particular period of time (usually a day).3) credit riskCredit risk, inherent in all banking activities, arises from the possibilitythat the counterparty to a contract cannot or will not make the agreed payment at maturity. When an institution provides credit, whatever the form, it expects to be repaid. When a bank or other dealing institution enters a foreign exchange contract, it faces a risk that the counterparty willnot perform according to the provisions of the contract. Between the timeof the deal and the time of the settlement, be it a matter of hours, days, ormonths, there is an extension of credit by both parties and an acceptanceof credit risk by the banks or other financial institutions involved. As in thecase of market risk, credit risk is one of the fundamental risks to be monitored and controlled in foreign exchange trading.4) legal risksThere are legal risks, or the risk of loss that a contract cannot be enforced, which may occur, for example, because the counterparty is not legally capable of making the binding agreement, or because of insufficient documentation or a contract in conflict with statutes or regulatory policy.2. True or False1) True 2) true3. Translation1) Broadly speaking, the risks in trading foreign exchange are thesame as those in marketing other financial products. These risks canbe categorized and subdivided in any number of ways, depending onthe particular focus desired and the degree of detail sought. Here, thefocus is on two of the basic categories of risk —market risk and credit risk (including settlement risk and sovereign risk) —as they apply to foreign exchange trading. Note is also taken of some other importantrisks in foreign exchange trading —liquidity risk, legal risk, and operational risk2) It was noted that foreign exchange trading is subject to a particularform of credit risk known as settlement risk or Herstatt risk, which stems in part from the fact that the two legs of a foreign exchange transaction are often settled in two different time zones, with differentbusiness hours. Also noted was the fact that market participants andcentral banks have undertaken considerable initiatives in recent yearsto reduce Herstatt risk.4. Discussions2) Discuss the way how VAR works in measuring and managingmarket risk?3) Why are banks so interested in political or country risk?4) Discuss other forms of risks which you know in foreign exchange.Chapter 11The Determination of Exchange Rates汇率的决定1. Key Terms1) PPPPurchasing Power Parity (PPP) theory holds that in the long run, exchange rates will adjust to equalize the relative purchasing power of currencies. This concept follows from the law of one price, which holds thatin competitive markets, identical goods will sell for identical prices when valued in the same currency.2) the law of one priceThe law of one price relates to an individual product. A generalization ofthat law is the absolute version of PPP, the proposition that exchange rates will equate nations' overall price levels.3) FEER“fundamental equilibrium exchange rate, ”or FEER, envisaged as the equilibrium exchange rate that would reconcile a nation's internal and external balance. In that system, each country would commit itself to a macroeconomic strategy designed to lead, in the medium term, to “internal balance ”—defined as unemployment at the natural rate and minimal inflation —and to “external balance ”—defined as achieving the targeted current account balance. Each country would be committed to holding its exchange rate within a band or target zone around the FEER, or the level needed to reconcile internal and external balance during the intervening adjustment period.4) monetary approachThe monetary approach to exchange rate determination is based onthe proposition that exchange rates are established through the process of balancing the total supply of, and the total demand for, the national moneyin each nation. The premise is that the supply of money can be controlledby the nation's monetary authorities, and that the demand for money has a stable and predictable linkage to a few key variables, including an inverserelationship to the interest rate —that is, the higher the interest rate, the smaller the demand for money.5) portfolio balance approachThe portfolio balance approach takes a shorter-term view of exchange rates and broadens the focus from the demand and supply conditions for money to take account of the demand and supply conditions for other financial assets aswell. Unlike the m onetary approach, the portfolio balance approach assumes that domestic and foreign bonds are not perfect substitutes. According to the portfolio balance theory in its simplest form, firms and individuals balance their portfolios among domestic money, domestic bonds, and foreign currency bonds, and they modify their portfolios as conditions change. It is the process of equilibrating the total demand for, and supply of, financial assets in each country that determinesthe exchange rate.2. True or False1) true 2) true3. Cloze1）PPP is based in part on some unrealistic assumptions: that goods are identical; that all goods are tradable; that there are notransportation costs, information gaps, taxes, tariffs, or restrictionsof trade; and —implicitly and importantly —that exchange rates areinfluenced only by relative inflation rates. But contrary to theimplicit PPP assumption, exchange rates also can change forreasons other than differences in inflation rates. Real exchangerates can and do change significantly over time, because of suchthings as major shifts in productivity growth, advancesin technology, shifts in factor supplies, changes in marketstructure, commodity shocks, shortage, and booms.2） Each individual and firm chooses a portfolio to suit its needs, based on a variety of considerations —t he holder's wealth and tastes, thelevel of domestic and foreign interest rates, expectations of futureinflation, interest rates, and so on. Any significant change in theunderlying factors will cause the holder to adjust his portfolio andseek a new equilibrium. These actions to balance portfolios willinfluence exchange rates.4. Discussions1）How does the purchasing power parity work?2）D escribe and discuss one model for forecasting foreign exchange rates.3）M ake commends on how good are the various approaches mentioned in the chapter.4）C entral banks occasionally intervene in foreign exchange markets. Discuss the purpose of such intervention. How effective is intervention?Chapter 121. Key Terms 1）money market The Financial Markets 金融市场The money market is really a market for short-term credit, or the option to use someone else's money for a period of time in return for the payment of interest. The money market helps the participants in the economic process cope with routine financial uncertainties. It assists in bridging the differences in the timing of payments and receipts that arise in a market economy.2）c apital marketMarkets dealing in instruments with maturities that exceed one year are often referred to as capital markets.3）p rimary marketThe term “primary market ”applies to the original issuance of a credit market instrument. There are a variety of techniques for such sales,including auctions, posting of rates, direct placement, and activecustomer contacts by a salesperson specializing in the instrument4）secondary marketOnce a debt instrument has been issued, the purchaser may be able to resell it before maturity in a “secondary market. ”Again, a number of techniques are available for bringing together potential buyers andsellers of existing debt instruments. They include various types of formal exchanges, informal telephone dealer markets, and electronic trading through bids and offers on computer screens. Often, the same firms that provide primary marketing services help to create or “make ”secondary markets.5）RPsIn addition to making outright purchases and sales in the secondary market, entities with money to invest for a brief period can acquire a security temporarily, and holders of debt instruments can borrow shortterm by selling securities temporarily. These two types of transactionsare repurchase agreements (RPs) and reverse RPs, respectively. In the wholesale market, banks and government securities dealers offer RPsat competitive rates of return by selling securities under contracts providing for their repurchase from one day to several months later6）BAs 7）CDs (reference to 13.1)8）EurodollarEurodollars are U.S. dollar deposits at banking offices in a country other than the United States.9）EurobankEurobanks —banks dealing in Eurodollar or some other nonlocalcurrency deposits, including foreign branches of U.S. banks —originally held deposits almost exclusively in Europe, primarily London. Whilemost such deposits are still held in Europe, they are also held in suchplaces as the Bahamas, Bahrain, Canada, the Cayman Islands, HongKong, Singapore, and Tokyo, as well as other parts of the world.10） LIBOR (reference to 13.2.2 Certificates of Deposit)London inter-bank offer rate11） mortgage-backed securities12） Eurobond market (details make reference to13.3.3 )The Eurobond market, centered in London, is an offshore market in intermediate- and long-term debt issues. It serves as a source of capital for multinational corporations and for foreign governments. It developed afterthe United States instituted the interest equalization tax in 1963 to stemcapital outflows inspired by relatively low U.S. interest rates.2. True or False1) true 2) true 3) true3. Discussions1) Describe the characteristics of Interest Rate Swap and the role of itin the bank-related financial market.2) What risks are encountered in the swaps markets?3) Discuss one or two specific examples of derivative products andtheir use.4. Translations1) Markets dealing in instruments with maturities that exceed one yearare often referred to as capital markets, since credit to finance investmentsin new capital would generally be needed for more than one year. The time division is arbitrary. A long-term project can be started with short-term credit, with additional instruments may need to be renewed before a project is completed. Debt instruments that differ in maturity share other characteristics. Hence, the term “capital market ”could be –and occasionally is applied to some shorter maturity transactions.2) The secondary market for Treasure securities consists of a networkof dealers, brokers, and investors who effect transactions either by telephone or electronically. Telephone trades are generally between dealers and their customers. Electronics trading is arranged through screen-based systems provided by some of the dealers to their customers.It allows selected trades to take place without a conversation. When dealers trade with each other, they generally use brokers. Brokers provide information on screen, but the final trades are made by telephone.Chapter 13Concepts of Financial Assets Value金融资产价值的概念1. Key Terms1) absolute measure of valueAn absolute measure of value is used when one must compare itto a nominal amount: purchase price, amount to invest, target sum ofmoney to raise2) relative measure of valueA relative measure of rate of return is more convenient to use whenone wishes to compare one financial asset to a set of numerous alternative assets. A rate of return is the most commonly used relative measure ofvalue.3) discountingFuture benefits must be discounted (or converted) to their present (or today's) value, before they are summed. Discounting is part of the study oftime value of money, or actuarial mathematics, and a complete treatmentof it can be found in specialized textbook.4) time value of money。