国际金融英文版课后答案.doc

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 forces IV. 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 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 of the situation.4. After the collapse of the Bretton Woods System, the task of “rigorous monitoring” the exchange rate policy of member countries fell on the shoulder of IMF.5. Under normal conditions the stabilizing operations were sufficient to contain short-run fluctuations in a currencys 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-owned cooperatives 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 derivative which 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 as interest rate or bond, foreign exchange or foreign exchange rate and stock or stock indexes. There are mainly three types of derivatives: futures, options and swaps, each of which involves a mix of financial contracts.4. Companies and investment funds are using basic currency futures and currency options, ones that 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 banks 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 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 a haircut by charging the cost to your account.4. As the central bank and under the leadership of the State Council, the Peoples Bank of 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 high efficiency is crucial to a well-operated financial system.Chapter 4 Answers:II. 1integrity 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 on IV. 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 your account 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 old customers.5. Cash in advance means that the exporter is paid either when the importer places his order or when the goods are ready for shipment. Chapter 5. II1. b 2. c 3. c 4. a 5. b 6. b 7. a 8. c III. 1. guaranteed 2. without recourse 3. defaults 4. on the buyers account 5. is equivalent to 6. in question 7. devaluation 8. validity 9. discrepancy 10. inconsistent with Chapter 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 payment is 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 settlement purposes.5. Parcel post receipt is issued by the post office for goods sent by parcel post. It is both 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 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 or non-acceptance and advise accordingly to the collecting bank. 4. Any charges and expenses incurred by banks in connection with any action for protection 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 Terms 1）foreign exchange： “Foreign exchange” refers to 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 unconditional transfer of the value specified in a 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, the widespread use of the dollar reflects its substantial international role as: “investment” currency in many capital markets, “reserve” currency held by many central banks, “transaction” currency in many international commodity markets, “invoice” currency in many contracts, and “intervention” currency employed by monetary 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. In addition to being open when the numerous other financial centers in Europe are open, Londons morning hours overlap with the late hours in a number of Asian and Middle East markets; Londons 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 markets most widely traded currency?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 9 Instruments 交易工具1. Key Terms 1) spot transaction 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 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 terms The 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 swap An 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 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 base currency 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 wont 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 underlying currency, and a put option is the right, but not the obligation, to sell the underlying currency. All currency option trades involve two sidesthe purchase of one currency and the sale of anotherso 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 foreign currency.3) What advantages do foreign currency futures have over foreign currency 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 Chicago Mercantile Exchange ? Philadelphia Stock Exchange?Chapter 10Managing Risk in Foreign Exchange Trading 外汇市场交易的风险管理1. Key Terms 1) Market risk Market 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 riskthat is, risks of adverse change in a currency rate or in an interest rate. 2) VAR VAR 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 risk Credit 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 the settlement, 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 as those 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 riskmarket 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 tradingliquidity risk, legal risk, and operational risk2) It was noted that foreign exchange trading is subject to a particular form 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 different business hours. Also noted was th