MultinationalFinancialManagement（跨国公司财务管理）ch13FunctionsofEuromarkets

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1、CHAPTER 13Functions of Euromarkets I. THE EUROCURRENCY MARKETSTHE EUROMARKETS-the most obvious example of the globalization of financial marketsA. The Eurocurrency Market1. Composed of eurobanks who accept/maintain deposits of foreign currency2. Dominant currency: US$ THE EUROCURRENCY MARKETSB. Grow

2、th of Eurodollar Marketcaused by restrictive US government policies, especially1. Reserve requirements on deposits2. Special charges and taxes3. Required concessionary loan rates4. Interest rate ceilings5. Rules which restrict bank competition. THE EUROCURRENCY MARKETSC. Eurodollar Creation involves

3、1. A chain of deposits2. Changing control/usage of deposit THE EUROCURRENCY MARKETS3. Eurocurrency loansa. Use London Interbank Offer Rate: LIBOR as basic rateb. Six month rolloversc. Risk indicator: size of margin between cost and rate charged. THE EUROCURRENCY MARKETS4. Multicurrency Clausesa. Cla

4、use gives borrower option to switch currency of loan at rollover.b. Reduces exchange rate risk THE EUROCURRENCY MARKETS5. Domestic vs. Eurocurrency Marketsa. Closely linked rates by arbitrageb. Euro rates: tend to lower lending, higher deposit II. EUROBONDSA. DEFINITION OF EUROBONDSbonds sold outsid

5、e the country of currency denomination.1. Recent Substantial Market Growth due to use of swaps.a financial instrument which gives 2 parties the right to exchange streams of income over time. EUROBONDS2. Links to Domestic Bond Marketsarbitrage has eliminated interestrate differential.3. Placementunde

6、rwritten by syndicates of banks EUROBONDS4. Currency Denominationa. Most often US$b. “Cocktails” allow a basket of currencies5. Eurobond Secondary Market -result of rising investor demand6. Retirementa. sinking fund usuallyb. some carry call provisions. EUROBONDS7. Ratingsa. According to relative riskb. Rating Agencies Moodys, Standard not U.S. CPs.3. Smaller fraction of Euro usecredit rating services to rate.