CH11 - CHAPTER 11 INTERNATIONAL FINANCIAL MARKETS CHAPTER...

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CHAPTER 11 INTERNATIONAL FINANCIAL MARKETS CHAPTER OUTLINE I. Eurocurrency Markets a) Creation of Eurodollars (1) Uses of Eurodollars b) Eurodollar instruments (1) Eurodollar deposits (2) Eurodollar loans (2) Interest rates c) Euronote issue facilities II. Eurocurrency Interbank Market a) An overview of Eurocurrency interbank market (1) Functions of the interbank market (2) Risks of participating banks (3) Minimum standards of international banks (4) “Three Cs” of central banking b) The role of banks in corporate governance c) The United States: a market-based system of corporate governance d) Japan: a bank-based system of corporate governance e) Political dynamics III. The Asian Currency Market IV. The International Bond Market a) Types of international bonds (1) Foreign bonds (2) Eurobonds (3) Global bonds b) International bond market size and its currency denomination (1)Currency-option bonds (2) Currency-cocktail bonds c) Types of international bonds (1) Straight bonds (2) Floating-rate notes (3) Convertible bonds (4) Bonds with warrants (5) Other bonds (6) Percentage breakdown of the total bond market by instrument f) The International Equity Market a) New trends in the stock markets (1) Stock market alliance (2) Crosslisting 89
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(3) Stock market concentration (4) Privatization VI. Long-Term Capital Flows to Developing Countries a) Rotation from debt to equity VII. Summary 90
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CHAPTER OBJECTIVE Chapter 11 examines the three financial markets--Eurocurrency, international bond, and equity--that allow companies to serve customers around the world. We discuss the four key aspects of the Eurocurrency market: the creation of Eurodollars, Eurodollar instruments, Euronote issue facilities, and the Eurocurrency interbank market. We also discuss the creation and the emergence of the Asian currency market. Because international debt and equity are discussed in this chapter, we also present current trends in capital flows to developing countries. KEY TERMS AND CONCEPTS Eurocurrency market consists of banks that accept deposits and make loans in foreign currencies outside the country of issue. Eurodollar could be broadly defined as dollar-denominated deposits in banks all over the world except the United States. Certificate of deposit (CD) is a negotiable instrument issued by a bank. Revolving credit is a confirmed line of credit beyond one year. London interbank offered rate (LIBOR) is British Banker's Association average of interbank offered rates for dollar deposits in the London market based on quotations at 16 major banks. Euro interbank offered rate (EURIBOR) is European Banking Federation-sponsored rate among 57 euro-zone banks. Euronote issue facilities (EIF) are notes issued outside the country in whose currency they are denominated. Euronotes
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CH11 - CHAPTER 11 INTERNATIONAL FINANCIAL MARKETS CHAPTER...

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