International Business - Chapter 9

Front 1

capital market

Back 1

system that allocates financial resources in the form of debt and equity according to their most efficient uses

Front 2

debt

Back 2

loan in whcih the borrower promises to repay the borrowed amount

Front 3

bond

Back 3

debt instrument that specifies the timing of principal and interest payments

Front 4

equity

Back 4

part ownership of a company in which the equity holder participates with other part owners in the company's financial gains and losses

Front 5

stock

Back 5

shares of ownership in a company's assets that give shareholders a claim on the company's future cash flows

Front 6

liquidity

Back 6

ease with which bondholders and shareholders may convert their investments into cash

Front 7

international capital market

Back 7

network of individuals, companies, financial institutions, and governments that invest and borrow across national boundaries

Front 8

stock

Back 8

shares of ownership in a company's assets that give shareholders a claim on the company's future cash flows

Front 9

liquidity

Back 9

ease with which bondholders and shareholders may convert their investments into cash

Front 10

international capital market

Back 10

network of individuals, companies, financial institutions, and governments that invest and borrow across national boundaries

Front 11

securitization

Back 11

unbundling and repackaging of hard-to-trade financial assets into more liquid, negotiable, and marketable financial instruments

Front 12

offshore financial center

Back 12

country or territory whose financial sector features very few regulations and few, if any, taxes

Front 13

eurobond

Back 13

bond issued outside the country in whose currency it is denominated

Front 14

foreign bond

Back 14

bond sold outside the borrower's country and denominated in the currency of the country in which it is sold

Front 15

international equity market

Back 15

market consisting of all stocks bought and sold outside the issuer's home country

Front 16

eurocurrency market

Back 16

market consisting of all the world's currencies that are banked outside their countries of origin

Front 17

interbank interest rates

Back 17

interest rates that the world's largest banks charge one another for loans

Front 18

foreign exchange market

Back 18

market in which currencies are bought and sold and their prices determined

Front 19

exchange rate

Back 19

rate at which one currency is exchanged for another

Front 20

currency hedging

Back 20

practice of insuring against potential losses that result from adverse changes in exchange rates

Front 21

currency arbitrage

Back 21

instantaneous purchase and sale of a currency in different markets for profit

Front 22

interest arbitrage

Back 22

profit-motivated purchase and sale of interest-paying securities denominated in different currencies

Front 23

currency speculation

Back 23

purchase of sale of a currency with the expectation that its value will change and generate a profit

Front 24

exchange-rate risk

Back 24

risk of adverse changes in exchange rates

Front 25

cross rate

Back 25

exchange rate calculated using two other exchange rates

Front 26

spot rate

Back 26

exchange rate requiring delivery of the traded currency within two business days

Front 27

spot market

Back 27

market for currency transactions at spot rates

Front 28

forward rate

Back 28

exchange rate at which two parties agree to exchange currencies on a specified future date

Front 29

forward market

Back 29

market for currency transactions at forward rates

Front 30

forward contract

Back 30

contract that requires the exchange of an agreed-upon amount of a currency on an agreed-upon date at a specific exchange rate

Front 31

derivative

Back 31

financial instrument whose value derives from other commodities or financial instruments

Front 32

currency swap

Back 32

simultaneous purchase and sale of foreign exchange for two different dates

Front 33

currency option

Back 33

right, or option, to exchange a specific amount of a currency on a specific date at a specific rate

Front 34

currency futures contract

Back 34

contract requiring the exchange of a specific amount of currency on a specific date at a specific exchange rate, with all conditions fixed and not adjustable

Front 35

vehicle currency

Back 35

currency used as an intermediary to convert funds between two other currencies

Front 36

interbank market

Back 36

market in which the world's largest banks exchange currencies at sport and forward rates

Front 37

clearing

Back 37

process of aggregating the currencies that one bank owes another and then carrying out the transaction

Front 38

securities exchange

Back 38

exchange specializing in currency futures and options transactions

Front 39

over-the-counter market

Back 39

decentralized exchange encompassing a global computer network of foreign exchange traders and other market participants

Front 40

convertible currency

Back 40

currency that trades freely in the foreign exchange market, with its price determined by the forces of supply and demand

Front 41

countertrade

Back 41

practice of selling goods or services that are paid for, in whole or part, with other goods or services