Topic 11 Project financing and managing cross border risks Foreign exchange market Foreign exchange market provides the physical and institutional

Topic 11 Project financing and managing cross border risks...

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Topic 11: Project financing and managing cross border risks Foreign exchange market Foreign exchange market provides the physical and institutional structure through which the money of one country is exchanged for that of another country. There are two categories of markets, wholesale market (interbank market) and retail market. There are two sets of transaction that take place in the foreign exchange markets, spot and forward transaction. Participants in the foreign exchange markets undertake 3 activities: arbitrage, hedging and speculation. Role of international banks in foreign exchange market It serves as financial intermediaries in the foreign exchange market by buying or selling currencies to accommodate customers. Project financing The financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project. In project finance the point of
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