Chap021

Chap021 - Chapter 21 International Financial Markets and...

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Chapter 21 – International Financial Markets and Instruments: An Introduction CHAPTER 21 INTERNATIONAL FINANCIAL MARKETS AND INSTRUMENTS: An Introduction Learning Objectives: To become aware of the fundamental components of international financial markets. To understand how global money markets, interest rates, and foreign exchange markets are interdependent. To learn about the types and roles of international currency and monetary derivatives. I. Outline Introduction - Financial Globalization: A Recent Phenomenon? International Bank Lending The International Bond Market (Debt Securities) International Stock Markets Financial Linkages and Eurocurrency Derivatives - Basic International Financial Linkages: A Review - International Financial Linkages and the Eurodollar Market - Hedging Eurodollar Interest Rate Risk The Current Global Derivatives Market Summary II. Special Chapter Features In The Real World: Interest Rates across Countries In The Real World: Stock Market Performance in Developing/Transition Countries In The Real World: U.S. Domestic and Eurodollar Deposit and Lending Rates, 1989-2005 Concept Box 1: Eurodollar Interest Rate Futures Market Quotations Concept Box 2: Eurodollar Interest Option Quotations III. Purpose of the Chapter The purpose of this chapter is to introduce students to the characteristics and size of the many financial assets that are currently exchanged internationally. With the importance of international finance growing every day, it is important that students have a familiarity with the range of financial instruments available for transferring wealth across country borders and the nature of the investment decision that lies behind such movements. 21-1
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Chapter 21 – International Financial Markets and Instruments: An Introduction IV. Teaching Tips A. Students today accept as conventional wisdom that globalization is a new phenomenon that will continue throughout their lifetimes. The opening vignette can be used to make the point that increased interdependence among nations has occurred in previous times and that various forces can slow down or sometimes even reverse the phenomenon. B. Since the first part of the chapter is primarily descriptive, much of it can be left to the students to read on their own. It is useful, however, to point out the various ways in which these financial assets can come about and their possible implications for the carrying out of economic policy. C. This material can be brought to life by discussing the pros and cons of having international financial instruments in one’s own portfolio, either directly or indirectly through mutual funds. A discussion of the impact of the increased internationalization of investing on the various stock and bond markets can also trigger student interest. D.
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Chap021 - Chapter 21 International Financial Markets and...

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