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29 Cards in this Set
- Front
- Back
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CHIPS (Clearing House Interbank Payments System) |
organization in New York City that provides large, wholesale dollar payments services for businesses, banks, and governments |
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Payment in advance |
the safest method available to an exporter, but that which exposes the importer to some risk related to delivery of goods |
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value factors |
whether a firm has growth or value and how this firm characteristic provides an estimate of the cost of equity |
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margin call |
losses that are incurred and that cause the participant’s balance to fall below the maintenance margin at the end of the trading day |
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put option |
an investor’s right (but not obligation) to sell an asset (e.g., a currency) at a pre-determined price |
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syndicate |
a group of banks that collectively make a loan to a firm |
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currency forward contracts |
futures contracts available in currencies of emerging-market countries by large banks in the OTC market |
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beta risk |
a measurement of the general market risk of a stock in the Capital Asset Pricing Model (CAPM) |
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long position |
buying a currency in a currency futures contract and profiting on an increase in the value of the currency over time |
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money center banks |
large global banks |
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cost of capital |
the required rate of return demanded by stock and bond investors and is used in net present value capital budgeting analyses as the discount rate |
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call option |
an investor’s right (but not obligation) to buy an asset (e.g., a currency) at a pre-determined price |
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commercial letter of credit (LC) |
payment protection to both exporters and importers, as the importer’s bank writes a guarantee of payment |
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bond ratings |
Moody’s and Standard and Poor’s rating services which are important in assuring foreign investors of the credit quality of bond issues |
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exchange rate risk |
the impact of random change in the value of one currency with respect to other currencies
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cost of debt |
the weighted average of different interest rates paid on long-term borrowings |
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banker’s acceptance |
when a bank sells a LC into the financial marketplace as a money market instrument
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home bias |
investing most of retirement and other savings in one’s home country, which reduces diversification
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Eurobonds |
bonds that are sold in any country outside the home country, but in the home country’s currency |
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Currency swaps |
allow firms to exchange currencies at a previously agreed exchange rate as a way to hedge exchange rate movements |
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premium |
the price paid by the buyer to the seller for an option contract |
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exchange risk betas |
the sensitivity of a stock to market risk affected by currency movements |
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open account |
a simple agreement wherein the exporter sends an invoice with the goods and the exporter pays upon the receipt |
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Foreign bonds |
bonds that are issued by foreign firms in another country in the home currency of that country |
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Currency futures contracts |
standardized agreements to buy or sell a specified amount of currency at a date in the future at a pre-determined price |
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Special Drawing Right (SDR) |
a basket of currencies consisting of dollars, euros, pounds, and yen created by the International Monetary Fund (IMF) |
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term financing |
bank and government loans to importers to cover the cost of major purchases |
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Transactions risk |
how short-term changes in exchange rates can affect operating costs and revenues of firms engaged in international business activities
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plain vanilla currency swaps |
an interest rate swap, often combined with a currency swap, if the interest being swapped is in different currencies |
