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89 Cards in this Set

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Capital Market
Allocates financial resources in the form of debt and equity according to their most efficient uses
Debt
loan in which borrower promises to repay the borrowed amount plus rate of interest
Bond
debt instrument that specifies the timing of principal and interest and payments
Equity
Part ownership of a company in which the equity holder participates with other part owners in the company's financial gains and losses
Stock
Shares of ownership in a company's assets that give shareholders a claim on the company's future cash flow
Liquidity
ease with which bondholders and shareholders may convert their investment into cash
International Capital Market
Network of individuals, companies and financial institutions and governments that invest and borrow across national borders
Securitization
Unbundling and repacking of hard to trade financial assets into more liquid negotiable and marketing financial instrumentes (securities)
Offshore Financial Center
country or territory whose financial sector features very few regulations and few if any taxes
International Bond Market
All bonds sold by issuing companies, governments or other org outside their own countries
Eurobond
bond issued outside the country in whose currency it is dominated
Foreign Bond
bond sold outside the borrowers country and denominated in the currency of the country in which it is sold
International Market equity
All stocks bought and sold outside the issuers home country
Eurocurrency Market
All worlds currencies that are banked outside their countries of origin
Interbank interest rates
worlds largest banks charging one another for loans
Foreign Exchange Market
Currencies are bought and sold and their prices are determined
Exchange rate
rate at which one currency is exchanged for another
Currency Hedging
Insuring against potential losses that result from adverse changes in exchange rates
Currency Arbitrage
instantaneous purchase and sale of currency in different markets for profit
Interest arbitrage
profit motivated purchase and sale of interest paying securities denominated in different currencies
Currency Speculation
purchase or sale of currency with the expectation that its value will change and generate profit
Quoted currency
numerator in a quoted exchange rate or the currency with which another currency is to be purchased
Base Currency
denominator in a quoted exchange rate or the currency that is to be purchased with another currency
Exchange rate risk
risk of adverse changes in exchange rates
Cross rate
exchange rate calculated using two other exchange rates
Spot rate
exchange rate requiring delivery of the traded currency within two business days
Spot market
market for currency transactions at spot rates
Forward Rate
two parties agree to exchange currencies on a specified future date
Forward Market
Currency transactions at forward rates
Forward Contact
require exchange of an agreed upon amount of a currency on an agreed upon date at a specific exchange rate
Spot Rate
Exchange rate requiring delivery of the traded currency within two business days
Spot Market
Market for currency transactions at spot rates
Forward rate
Two parties agree to exchange currencies on a specified future date
Forward Market
Currency transaction at forward rates
Forward Contract
requires exchange of an agreed upon amount of currency on an agreed upon date at a specific exchange rate
Derivative
Financial instrument whose value derives from other commodities or financial instruments
Currency Swap
Purchase and Sale of foreign exchange for two different dates
Currency option
right or option to exchange a specific amount of a currency on a specific date at a specific rate
Currency Futures Contract
requiring exchange of a specific amount of currency on a specific date at a specific exchange rate with all conditions fixed and not adjustable
Vehicle Currency
used as an intermediary to convert funds between two other currencies
Interbank Market
World's largest banks exchange currencies at spot and forward rates
Clearing
aggregating currencies that one bank owes another then carrying out the transaction
Securities Exchange
specializing in currency futures and options transactions
Over the Counter Market (otc)
decentralized exchange encompassing a global computer network of foreign exchange traders and other market participants
Convertible (hard) currency
trades freely in the foreign exchange market, with its price determined by the forces of supply and demand
Countertrade
selling goods or services that are paid from in whole or in part with other goods and services
Devaluation
intentionally lowering the value of a nations currency
Revaluation
intentionally raising the value of a nations currency
Law of one price
principle that an identical item must have an identical price in all countries when the price is expressed in a common currency
Fisher effect
nominal interest rate is the sum of the real interest rate and the expected rate of inflation over a specific period
International Fisher Effect
difference in nominal interest rates support by two countries currencies will cause an equal but opposite change in their spot exchange rates
Efficient market view
prices of financial instruments reflect publicly available info at any given time
Inefficient market view
view that prices of financial instruments do not reflect all publicly available information
Fundamental analysis
uses statistical models based on fundamental economic indicators to forecast exchange rates
technical analysis
uses charts of past trends in currency prices and other factors to forecast exchange rates
International monetary system
agreements and institutions that govern exchange rates
Gold standard
international monetary system in which nations linked the value of their paper currencies to specific values of gold
Fixed exchange rate system
convert one currency into another fixed by international agreement
Bretton woods agreement
1944 create a new international monetary system based on the value of the US dollar
Fundamental disequilibrium
trade deficit causes a permanent negative shift in country's balance of payments
Special Drawing Right SDR
IMF asset whose value is based on a weighted basket of four currencies
Smithsonian Agreement
1971 IMF members restructure and strengthen international monetary system created at Bretton Woods
Jamaica Agreement
1976 IMF members formalize existing system of floating exchange rates as the new international monetary system
Free Float System
Currencies float freely against one another without governments intervening in currency markets
Currency Board
monetary regimes that is based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate
Planning
identifying and selecting an org objectives and deciding how the org with achieve those obj
Strategy
planned actions taken by managers to help a company meet its obj
Mission statement
written statement of why a company exists and what it plans to accomplish
Stakeholders
all parties, ranging from suppliers and employees to stockholders and consumers who are affected by a company's activities
Core Competency
special ability of a company that competitors find extremely difficult or impossible to equal
Value chain analysis
dividing a company's activities into primary and support activities and identifying those that create a value for customers
Multinational (Multidomestic) Strategy
adapting products and their marketing strategies in each national market to suit local preferences
Global strategy
offering the same products using the same marketing strategy in all national markets
Growth Strategy
strategy designed to increase the scale or scope of a corporations operations
retrenchment strategy
reduce the scale or scope of a corporations business
Stability strategy
guard against change and used by corporations to avoid either growth or retrenchment
Combination strategy
mix growth, retrenchment and stability strategies across a corporations business units
Low cost leadership
Company exploits economies of scale to have lowest cost structure of any competitor in its industry
Differentiations strategy
company designs its products to be perceived as unique by buyers throughout its industry
Focus strategy
Strategy in which a company focuses on a serving the needs of a narrowly defined market segment by being the low cost leader by differentiating its product or both
Organizational structure
company divides its activities among separate units and coordinates activities among those units
Chain of command
lines of authority that run up from top management to individual employees and specify internal reporting relationship
International division structure
separates domestic from international business activities by creating a separate international division with its own manager
international area structure
organizes a company's entire global operations into countries or geographic regions
global product structure
divides worldwide operations according to a company's product area
global matrix structure
splits chain of command between product and area divisions
self managed team
employees from a single department take on the responsibilities of their former supervisors
cross functional team
employees who work at similar levels in different functional departments
global team
team of top managers from both headquarters and international subsidiaries who meet to develop solutions to company wide problems