跨国公司理财(整理)英语.doc

Answer the following questions: 1. What are the functions of the foreign exchange markets?l The mechanism 机制 by which participants transfer purchasing power 购买力 between countriesl Obtain or provide credit 信贷 for international trade (and investments) transactions 国际贸易和投资业务l Minimize exposure 暴露程度 to the risks 风险 of exchange rate changes 2. What is the Interest Rate Parity (IRP)? n The theory of interest rate parity (IRP) provides the link between the foreign exchange markets and the international money markets.n The difference in the national interest rates for securities 证券 of similar risk and maturity should be equal to, but opposite in sign to, the forward rate discount or premium for the foreign currency, except for transaction costs. 3. What are the differences between currency futures and currency forward contracts? Characteristic Foreign Currency FuturesForward Contracts SizeStandardized Any size desiredMaturityFixed, longest: one yearAny up to 1 y., sometimes longerLocationOn an organized exchangeBy telecom linkagesPricing Open outcry process By bid and ask quotesMarginInitial margin that is marked to market on a daily basisNo explicit collateral, but standard bank relationship necessarySettlementRarely delivered upon; normally through purchase of offsetting positionNormally delivered upon, offsetting positions is possible.CommissionsSingle commission No explicit commission; banks earn through the bid-ask spreads.Trading hoursDuring exchange hours; some 24 hours. Negotiated by phone or internet, 24 hours.CounterpartiesUnknown to each otherIn direct contact.LiquidityLiquid, relatively small.Liquid, relatively large. 4. What is the key factor that attracts both depositors and borrowers to the Eurocurrency markets? v The narrow interest rate spread within that market. The difference between deposit and loan rates is often less than 1%. v Reasons of small interest spreads: 1) Low lending rates exist because the Eurocurrency market is a wholesale market 批发市场, where deposits and loans are made in amounts of $500,000 or more on an unsecured 无担保的 basis. 2) Borrowers are usually large corporations or government entities 实体 that qualify for low rates because of their credit standing 信用等级高 and because the transaction size is large. Overhead 管理费用assigned to 归于 the Eurocurrency operation by participating banks is small. 3) Deposit rates are high because the financial institutions offering Eurocurrency activities are not subject to many of the regulations 法规 and reserve requirements 准备金要求 imposed on traditional domestic banks and banking activities.5. What are the reasons to hedge? l Reduction in risk in future cash flows improves the planning 规划 capability of the firm. l Reduction of risk in future cash flows reduces the likelihood that the firms cash flows will fall below a necessary minimum 必须维持的最低金额. l Management has a comparative advantage 比较优势 over the individual shareholder in knowing the actual currency risk of the firm.l Markets are usually in disequilibrium 非均衡状态 because of structural and institutional imperfections 不完善, as well as unexpected external shocks 外来冲击(such as an oil crisis or terrorist attack 恐怖袭击).6. What is the “matching currency cash flows” (One of proactive policies for the management of operating exposure)? Give an example. l One way to offset an anticipated continuous long exposure 预期长期持续风险 to a particular currency is to acquire debt denominated in that currency. l Ex: (p.329) A U.S. firm with continuing export sales to Canada. In order to compete effectively 有效竞争 in Canadian markets, the firm invoices 开发票, 结算 all export sales in Canadian dollars. This policy results in a continuing receipt of Canadian dollars month after month. l Hedge 对冲：The U.S. firm were to acquire part of its debt-capital in the Canadian dollar markets, it could use the relatively predictable Canadian dollar cash inflows from export sales to service 偿付 the principal and interest payments on Canadian dollar debt and be cash flow matched.7. What is the risk sharing agreement (One of proactive policies for the management of operating exposure)? Give an example. l Risk-sharing is a contractual arrangement in which the buyer and seller to “share 共享” or split 分摊 currency movement impacts 影响 on payments between them. l Ex: (p.296) Ford (U.S.) imports automotive parts 汽车组件from Mazda (Japan) every month, major swings 波动 in exchange rates can benefit one party 一方at the expense of the other. l Solution: Ford and Mazda agree that all purchases by Ford will be made in Japanese yen at the current exchange rate, as long as the spot rate on the date of invoice is between, say, 115/$ and 125/$.l If the exchange rate is between these values on the payment dates, Ford agrees to accept whatever transaction exposure exists. l If, however, the exchange rate falls outside this range on the payment date, Ford and Mazda will share the difference equally.8. What is the difference between direct investment and portfolio investment? v Direct Investment 直接投资. This is the net balance of capital dispersed 流动 from and into the United States for the purpose of exerting control 进行控制 over assets.v When the capital flows out of the U.S., it enters the balance of payments as a negative cash flow. If, however, a foreign firm purchases a firm in the United States, it is a capital inflow and enters the balance of payments positively.v Whenever 10% or more of the voting 投票, 表决 shares in a U.S. company are held by foreign investors, the company is classified as the U.S. affiliate of a foreign company, and a foreign direct investment 外来直接投资.v Portfolio Investment 证券投资. This is net balance of capital which flows in and out of the United States but does not reach the 10% ownership threshold 门槛, 限 of direct investment.v If a U.S. resident purchases shares in a Japanese firm but does not attain the 10% threshold, we define the purchase as a portfolio investment (and in this case an outflow of capital).Part 1 - Explain the following terms: 1. Direct quote (one of the foreign exchange quotes) A direct quote is a home currency 本币 price of a unit 单位 of foreign currency 外币.2. Indirect quote (one of the foreign exchange quotes) An indirect quote is a foreign currency price of a unit of home currency.3. Law of one price If identical products or services can be sold in two different markets, and no restrictions exist on the sale or transportation costs 销售或运输成本 of moving the product between markets, the products price should be the same in both markets.4. Foreign Currency Options A foreign currency option is a contract giving the option purchaser (the buyer) the right 权利, but not the obligation 责任, to buy or sell a given amount of foreign exchange at a fixed price per unit for a specified time period.5. Currency board arrangements (one of IMFs Exchange Rate Regimes) A monetary regime based on an implicit legislative commitment 隐含法律承诺 to exchange domestic currency for a specified foreign currency at a fixed exchange rate , combined with restrictions on the issuing authority 发行货币当局 to ensure the fulfillment of its legal obligation 法律责任.6. Managed floating with no preannounced path for the exchange rate (one of IMFs Exchange Rate Regimes) 无事先宣告路径的管理浮动汇率The monetary authority 货币当局 influences the movements of the exchange rate through active intervention 积极干预 in the foreign exchange market without specifying 说明, or precommitting 事先承诺 to, a preannounced path for the exchange rate.7. Independent floating (one of IMFs Exchange Rate Regimes) The exchange rate is market-determined 由市场决定, with any foreign exchange intervention aimed at moderating 缓和 the rate of change and preventing undue fluctuations 过度波动 in the exchange rate, rather than establishing a level 确定、建立一个水平 for it.8. Eurocurrencies Eurocurrencies are domestic currencies of one country on deposit in a second country.9. Eurodollars American dollars deposited in Europe.10. Eurobanks Banks in which Eurocurrencies are deposited.A Eurobank is a fianancial intermediary 中介 that simultaneously bids for time deposits and makes loans in a currency other than 非, 除了 that of the country in which it is located. Eurobanks are major world banks that conduct 实施, 进行 a Eurocurrency business in addition to all other banking functions. The Eurocurrency operation that qualifies a bank for the name “Eurobank” is in fact a department of a large commercial bank.11. Eurocurrency Interest Rates: LIBOR In the Eurocurrency market, the reference rate of interest is the London Interbank Offered Rate (LIBOR).LIBOR is now the most widely ac