International Financial Markets Final

Front 1

Technical Forecasting

Back 1

Developments of forecasts using historical prices or trends.

Front 2

Fundamental Forecasting

Back 2

Forecasting based on fundamental relationships between economic variables and exchange.

Front 3

Market-Based Forecasting

Back 3

Use of a market-determined exchange rate to forecast the spot rate in the future

Front 4

Filter Rule

Back 4

Based on a certainty in price momentum, or the belief that rising prices tend to continue to rise and falling prices tend to continue to fall.

Front 5

Moving average crossover rule

Back 5

When the moving averages of different amounts (i.e. 30 and 60 day moving averages) crossover each other. This is more likely to occur if the market/ index/ stock is/has been particularly volatile.

Front 6

RSI

Back 6

Relative Strength index- a technical indicator used to to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period.

Front 7

RMSE

Back 7

Root Mean Square Error- Used to measure the difference of values between what was predicted by an indicator and what the actual values turn out to be.

Front 8

Random Walk

Back 8

Mathematical formulation of a process that has a succession of random steps.

Front 9

Implied exchange rate volatility

Back 9

The estimated volatility of a securities price, generally up when the market is bullish and down when the market is bearish.

Front 10

Transaction Exposure

Back 10

Degree to which the value of future cash transactions can be affected be exchange rate fluctuations.

Front 11

Economic Exposure

Back 11

Degree to which a firm’s present value of future cash flows can be influenced by exchange rate fluctuations.

Front 12

Translation Exposure

Back 12

Degree to which a firm’s consolidated financial statements are exposed to fluctuations in exchange rates.

Front 13

VAR

Back 13

Value at Risk- A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame.

Front 14

Money Market Hedge

Back 14

Use of international money markets to match future cash inflows and outflows in a given currency.

Front 15

Cross Hedging

Back 15

Hedging an open position in one currency with a hedge on another currency that is highly correlated with the first currency. Not a perfect hedge.

Front 16

Cost of Capital

Back 16

The cost of funds used for financing a business

Front 17

Capital Structure

Back 17

A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity.

Front 18

Long term financing

Back 18

A loan or other financial obligation lasting more than one year.

Front 19

Short term financing

Back 19

A loan or other financial obligation lasting less than one year.

Front 20

Stockholder vs Creditor Conflict

Back 20

Otherwise known as an agency problem, For example, managers could borrow money to repurchase shares to lower the corporation's share base and increase shareholder return. Stockholders will benefit; however, creditors will be concerned given the increase in debt that would affect future cash flows.

Front 21

Currency swap

Back 21

Agreement to exchange one currency for another at a specified exchange rate and date. Banks commonly serve as intermediaries between two parties who wish to engage in a currency swap.

Front 22

Parallel loans

Back 22

Loan involving an exchange of currencies between two parties, with a promise to reexchange the currencies at a specified exchange rate and future date.

Front 23

Interest rate swap

Back 23

Agreement to swap interest payments, whereby interest payments based on a fixed interest rate are exchanged for interest payments based on a floating interest rate.

Front 24

Plain Vanilla Swap

Back 24

The most basic type of forward claim that is traded in the over-the-counter market between two private parties, usually firms or financial institutions.

Front 25

Basis Swap

Back 25

A type of swap in which two parties swap variable interest rates based on different money markets.

Front 26

Callable Swap

Back 26

An exchange of cash flows in which one counterparty makes payments based on a fixed interest rate, the other counterparty makes payments based on a floating interest rate and the counterparty paying the fixed interest rate has the right to end the swap before it matures.

Front 27

Swaption

Back 27

The option to enter into an interest rate swap. In exchange for an option premium, the buyer gains the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date.

Front 28

Euro Notes

Back 28

Unsecured debt securities issued by MNC’s for short term financing.

Front 29

Euro commercial papers

Back 29

Paper debt securities issued by MNC’s for short term financing.

Front 30

Effective financing cost

Back 30

The effective rate that a company pays on its current debt.