MAF101 Lecture Notes - Lecture 10: Foreign Exchange Market, Credit Risk, Interbank
Document Summary
Globalisation: growth in international business over the last 30 years has led to the development of various international markets such as: Financial managers must understand the available financial markets so they can be used to facilitate international business transactions. Facilitates the process by which finds are transferred from surplus to deficit units for short term use. Ba(cid:374)ks, multi(cid:374)atio(cid:374)al (cid:272)o(cid:373)pa(cid:374)ies (cid:894)mnc"s(cid:895), go(cid:448)er(cid:374)(cid:373)e(cid:374)ts et(cid:272). (cid:373)a(cid:455) (cid:374)eed to (cid:271)orro(cid:449)/i(cid:374)(cid:448)est short ter(cid:373) fu(cid:374)ds denominated in a currency different from their home currency they thus use the international money markets. Instruments include short term securities such as treasury bills, banks accepted bills, certificates of deposit, commercial paper, asset-backed securities. The international money market has grown because firms/funds/governments may: Need to borrow funds to pay for imports denominated in a foreign currency. Choose to borrow in a currency where the interest rate is lower. Choose to borrow in a currency that is expected to.
