跨国公司理财整理1.doc

Answer the following questions: 1. What are the functions of the foreign exchange markets? The mechanism 机制 by which participants transfer purchasing power 购买力 between countries Obtain or provide credit 信贷 for international trade (and investments) transactions 国际贸易和投资业务 Minimize exposure 暴露程度 to the risks 风险 of exchange rate changes 2. What is the Interest Rate Parity (IRP)? The theory of interest rate parity (IRP) provides the link between the foreign exchange markets and the international money markets. The difference in the national interest rates for securities 证券 of similar risk and maturity should be equal to, but opposite in sign to, the forward rate discount or premium for the foreign currency, except for transaction costs. 3. What are the differences between currency futures and currency forward contracts? Characteristic Foreign Currency Futures Forward Contracts Size Standardized Any size desired Maturity Fixed, longest: one year Any up to 1 y., sometimes longer Location On an organized exchange By telecom linkages Pricing Open outcry process By bid and ask quotes Margin Initial margin that is marked to market on a daily basis No explicit collateral, but standard bank relationship necessary Settlement Rarely delivered upon; normally through purchase of offsetting position Normally delivered upon, offsetting positions is possible. Commissions Single commission No explicit commission; banks earn through the bid-ask spreads. Trading hours During exchange hours; some 24 hours. Negotiated by phone or internet, 24 hours. Counterparties Unknown to each other In direct contact. Liquidity Liquid, relatively small. Liquid, relatively large. 4. What is the key factor that attracts both depositors and borrowers to the Eurocurrency markets? The narrow interest rate spread within that market. The difference between deposit and loan rates is often less than 1%. Reasons of small interest spreads: 1) Low lending rates exist because the E