最新multinational financial management（跨国公司财务）ch07 foreign exchange market operation and mechanics(共33张ppt课件).pptx

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1、CHAPTER 7Foreign Exchange Market: Operation and Mechanics 第一页，共三十三页。PART I. INTRODUCTIONI.INTRODUCTIONA.The Currency Market:where money denominated in one currency is bought and sold with money denominated in another currency.第二页，共三十三页。 INTRODUCTIONB. International Trade and Capital Transactions:fac

2、ilitated with the abilityto transfer purchasing powerbetween countries第三页，共三十三页。INTRODUCTIONC.Location1.OTC-type: no specific location2.Most trades by phone, telex, or SWIFTSWIFT: Society for Worldwide Interbank Financial Telecommunications 第四页，共三十三页。PART II.ORGANIZATION OF THE FOREIGN EXCHANGE MARK

3、ETI .PARTICIPANTS IN THE FOREIGN EXCHANGE MARKET A.Participants at 2 Levels1.Wholesale Level (95%)- major banks2.Retail Level- business customers 第五页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKETB.Two Types of Currency Markets1.Spot Market:- immediate transaction- recorded by 2nd business day 第六

4、页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKET2.Forward Market:- transactions take place at a specified future date第七页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKETC.Participants by Market1. Spot Mmercial banksb.brokersc.customers of commercial and central banks第八页，共三十三页。ORGANIZATION OF THE

5、 FOREIGN EXCHANGE MARKET2. Forward Marketa.arbitrageursb.tradersc.hedgersd.speculators第九页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKETII.CLEARING SYSTEMSA. Clearing House Interbank Payments System (CHIPS) - used in U.S. for electronic fund transfers.第十页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANG

6、E MARKETB.FedWire- operated by the Fed- used for domestic transfers第十一页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKETIII.ELECTRONIC TRADINGA.Automated Trading- genuine screen-based market第十二页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKETB.Results:1.Reduces cost of trading2.Threatens traders

7、oligopoly of information 3.Provides liquidity第十三页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKETIV.SIZE OF THE MARKETA. Largest in the world2004: US$1.9 trillion dailyorUS$475 trillion a yearIn 1999 the US GDP was US$9.1 trillion第十四页，共三十三页。ORGANIZATION OF THE FOREIGN EXCHANGE MARKETB.Market Cente

8、rs (2004): #1: London =$753 billion daily #2: New York= $461 billion daily#3: Tokyo = $199 billion daily第十五页，共三十三页。PART III.THE SPOT MARKETI.SPOT QUOTATIONSA.Sources 1.All major newspapers2.Major currencies have four different quotes:a.spot priceb.30-dayc.90-dayd.180-day第十六页，共三十三页。THE SPOT MARKETB.M

9、ethod of Quotation1.For interbank dollar trades:a.American termsexample: $1.21/b.European termsexample: Peso1.713/$第十七页，共三十三页。THE SPOT MARKET2. For nonbank customers:Direct quote gives the home currency price (always in the numerator) of one unit of foreign currency.EXAMPLE: $1.81/Since this is a di

10、rect quote, we know that in the U.S., one pound transacted at $1.81.第十八页，共三十三页。THE SPOT MARKETC.Transactions Costs1. Bid-Ask Spreadused to calculate the feecharged by the bankBid = the price at which the bank is willing to buy Ask = the price it will sellthe currency第十九页，共三十三页。THE SPOT MARKET4.Perce

11、nt Spread Formula (PS):100 xAskBidAskPS第二十页，共三十三页。THE SPOT MARKETD.Cross Rates1.The exchange rate between 2 non - US$ currencies.第二十一页，共三十三页。THE SPOT MARKET2.Calculating Cross RatesSuppose you want to calculate the / cross rate.You know .5556/US$ and .8334/US$then / = .5556/US$ .8334/US$= .6667/ 第二十

12、二页，共三十三页。THE SPOT MARKETE.Currency Arbitrage1.If cross rates differ from one financial center to another, and profit opportunities exist.2.Buy cheap in one intl market,sell at a higher price in another3.The Critical Role of Available Information第二十三页，共三十三页。THE SPOT MARKETF.Settlement Date Value Date

13、:1.Date monies are due2.2nd Working day after date of original transaction.第二十四页，共三十三页。THE SPOT MARKETG.Exchange Risk1.Bankers = middlemena.Incurring risk of adverseexchange rate moves.b.Increased uncertainty about future exchange rate requires1.) Demand for higher riskpremium2.)Bankers widen bid-as

14、k spread第二十五页，共三十三页。MECHANICS OF SPOT TRANSACTIONSSPOT TRANSACTIONS: ExampleStep 1.Currency transaction: verbal agreement, U.S. importer specifies:a. Account to debit (his acct)b. Account to credit (exporter)第二十六页，共三十三页。MECHANICS OF SPOT TRANSACTIONSStep 2.Bank sends importercontract note including:

15、- amount of foreigncurrency- agreed exchange rate- confirmation of Step 1.第二十七页，共三十三页。MECHANICS OF SPOT TRANSACTIONSStep 3.SettlementCorrespondent bank in HongKong transfers HK$ fromnostro account to exporters.Value Date. U.S. bank debits importersaccount.第二十八页，共三十三页。PART IV.THE FORWARD MARKETI. INT

16、RODUCTIONA. Definition of a Forward Contract:an agreement between a bank and a customer to deliver a specified amount of currency against another currency at a specified future date and at a fixed exchange rate.第二十九页，共三十三页。THE FORWARD MARKET2. Purpose of a Forward:Hedgingthe act of reducing exchange

17、rate risk.第三十页，共三十三页。THE FORWARD MARKETB.Forward Rate Quotations1. Two Methods:a.Outright Rate: quoted to commercial customers.b.Swap Rate: quoted in theinterbank market as a discount or premium.第三十一页，共三十三页。THE FORWARD MARKET CALCULATING THE FORWARDPREMIUM OR DISCOUNT= F-S x 12 x 100 S nwhere F = the forward rate of exchange S = the spot rate of exchange n = the number of months in the forward contract第三十二页，共三十三页。内容(nirng)总结CHAPTER 7。I.INTRODUCTION。1.Wholesale Level (95%)。B.Market Centers (2004):。I.SPOT QUOTATIONS。2.For nonbank customers:。forward contract第三十三页，共三十三页。