Global corporate finance - Kim
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www.ny.frb.org
The website of the Federal Reserve Bank of New York. The online book of this website, entitled
All About Foreign Exchange Market in the United States, can be downloaded for study. It provides a summary of many statistics from the BIS triennial report.
Internet exercises
1The IMF (www.imf.org), the World Bank (www.worldbank.org), and the United Nations (www.unsystem.org) are only a few of the major world organizations that track, report, and aid international economic and financial development. Use these websites and other sites linked to them to summarize the economic outlook for Cuba, Afghanistan, the United Kingdom, and Canada. For example, the full text of chapter 1 of the World Economic Outlook, published by the World Bank, is available through the IMF website. The Europa (EU) home page, www.europa.eu.int, and the website for the Bank for International Settlements, www.bis.org, are other useful resources for finding this information.
2The website of Pacific Policy Analysis, an extremely valuable exchange rate service (www.pacific.commerce.ubc.ca/xr), can be used to determine the value of the euro before its introduction on January 1, 1999. The calculation of the euro’s value before its introduction, assuming the fixed parities established by the European Union on December 31, 1998, gives some insight as to how its value had theoretically fluctuated even prior to its official launch. Plot the value of the euro since its inception and comment on its movement in the past year.
Chapter 5: The Foreign-Exchange Market and Parity Conditions
Internet resources
www.imf.org/external/fin.htm
The website of the International Monetary Fund (IMF) takes you directly to information on the IMF, SDRs, exchange rates, the position of each country in the IMF, and lending arrangements with member nations.
www.ny.frb.org/pihome/statistics/forex12.shtml
The website of the Federal Reserve Bank of New York takes you directly to daily noon foreignexchange rates. You may also try other menu options on this site to obtain detailed information about the foreign exchange market in the USA.
www.onanda.com
This website contains a wide variety of current and historical exchange rate data, along with stories relating to foreign exchange and links to the world’s central banks.
www.bis.org/publ/index.htm
This website contains the BIS annual report, together with statistics on derivatives, external debt, foreign-exchange market activity, and so on.
www.bloomberg.com
The Bloomberg website contains a wide variety of data on financial markets worldwide, including foreign-exchange and interest rate data.
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www.ft.com/cgi-bin/pft/monrates.pl/report
This web page of The Financial Times contains data on short-term Eurocurrency interest rates for the US dollar, the euro, the Swiss franc, the Japanese yen, the British pound, and several other currencies. This web page also links to worldwide exchange rate data.
www.ex.ac.uk/~Rdavies/arain/llyfr.html
This web page contains a detailed history of money from ancient times to the present.
www.ecb.int
The website of the European Central Bank (ECB) contains press releases and publications put out by the ECB, along with exchange rate data and other economic and financial statistics related to the eurozone.
www.europa.eu.int
The webste of the European Union (EU) contains news, information, and statistics on the EU and its member nations, and on the euro.
www.sysmod.com/eurofaq.htm
This website contains answers to frequently asked questions about the euro and EMU, as well as links to related websites
www.bis.org
This is the home page of the Bank for International Settlements. Many interesting reports and statistics can be obtained here. The triennial report entitled Central Bank Survey of Foreign Exchange and Derivatives Market Activity can be downloaded for study.
www.wto.org
The website of the World Trade Organization (WTO) contains news, information, and statistics on international trade.
www.worldbank.org
The website of the World Bank contains economic and demographic date on 206 countries (organized into “Country-at-a-Glance” tables) and various economic forecasts, and links to a number of other data sources.
Internet exercises
1Use one of the above-listed Internet resources to find the latest quotes for the US dollar, the euro, the British pound, and the Japanese yen. By how much did these currencies rise or fall against the dollar in the last day?
2Find the currency cross rates provided by Bloomberg (www.bloomberg.com) for the euro/dollar and euro/yen. Use the above cross rates to calculate the dollar/yen rate and then compare your calculated dollar/yen cross rate to the one reported by Bloomberg. Are the two cross rates the same?
3What is the euro worth? The European Union (www.europa.eu.int) provides a daily tracking of the euro’s value in terms of its constituent currencies. Use their website to find out how many Spanish pesetas the euro is worth today. What explanations have been given for the decline of the euro in the first 2 years of its existence?
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4Using the websites of The Wall Street Journal, www.wsj.com, The Financial Times, www.ft.com, and The Economist, www.economist.com, identify two countries that are having currency problems. Can you explain the causes of these currency problems?
Chapter 6: Currency Futures and Options
Internet resources
www.ny.frb.org/pihome/statistics/vrate.shtml
This web page of the Federal Reserve Bank of New York takes you directly to data on implied volatilities for foreign-exchange options.
www.bis.org/public/index.htm
This web page contains the BIS annual report, together with statistics on derivatives, external debt, and foreign-exchange market activity.
www.cme.com
The website of the Chicago Mercantile Exchange (CME) contains information and quotes on currency futures and options contracts.
www.phlx.com
The website of the Philadelphia Stock Exchange (PHLX) contains information and quotes on currency options contracts.
www.numa.com/ref/exchange.htm
This web page of the Numa Directory contains the web addresses of most of the stock and derivative exchanges in the world.
www.belfox.be
The website of the Belgian Futures and Options Exchange contains detailed information about the derivative products traded on it.
www.liffe.com
The website of the London International Financial Futures Exchange contains detailed information about the derivative products traded on it.
www.simex.com
The website of the Singapore International Monetary Exchange contains detailed information about the derivative products traded on it.
Internet exercises
1What currency futures contracts are currently being traded on the CME (www.cme.com)? Have currency future prices generally risen or fallen in the past day? Is there any news today that might explain the change in the futures prices?
2Use the New York Federal Reserve website, www.ny.frb.org/pihome/statistics/vrate.shtml, to obtain the currency volatilities over the past week and month for the Canadian dollar and
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the yen. Keep in mind that currency volatilities are the expected standard deviation of the daily spot rate for the coming period of the option’s maturity. Are these implied volatilities generally higher or lower for longer maturity contracts?
Chapter 7: Financial Swaps
Internet resources
www.isda.org
The website of the International Swaps and Derivatives Association, Inc., contains details of the activities of the ISDA and provides educational information about interest rates and currency swaps, as well as market survey data about the size of the swaps market.
www.bis.org
The website of the Bank for International Settlements contains many publications about foreign exchange and over-the-counter (OTC) derivatives.
www.finpipe.com/derivatives.htm
The Financial Pipelines website contains detailed reviews of options, futures, swaps, swaptions, structured notes, and other derivatives.
www.pgsenergy.com/c1.html
This web page of PGS Energy gives explanations on financial swaps, OTC markets, and commodity options.
www.moodys.com
The website of Moody’s contains country risk ratings and analyses.
www.standardpoors.com
The website of Standard & Poor’s contains country risk ratings and analyses.
www.siliconvalley.com/mld/siliconvalley/business/companies/
A web page for the study of various monetary swaps with major IT companies.
Internet exercises
1The ISDA, www.isda.org, is the primary global organization that attempts to both standardize the use of interest rate and cross-currency swaps and track the market’s size. Use ISDA’s website to find out which type of interest rate derivative is growing the fastest, the plain vanilla interest rate swap, the cross currency swap, or the various types of interest rate options.
2What country risk factors do Moody’s (www.moodys.com) and Standard & Poor’s (www.standardpoors.com) emphasize? How can one company use risk factors when it decides whether to engage in a swap agreement with a foreign company?
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Chapter 8: Exchange Rate Forecasting
Internet resources
www.oecd.org/std/nadata.htm
This web page contains data on PPP exchange rates for the OECD countries, going back to 1970. The PPP exchange rate data is in a spreadsheet format that can be downloaded.
www.oanda.com
This website contains current exchange rates along with currency forecasts and news.
www.pei-intl.com/Quotes/watch.htm
This web page contains daily, weekly, and monthly outlooks of foreign-exchange markets, world stocks, and bond markets.
www.anglefire.com/me/ozanpage/index.html
This web page contains data and explanation on foreign-exchange arbitrage.
Internet exercises
1Using OECD data from www.oecd.org/std/nadata.htm, plot the PPP exchange rates for the Australian dollar, the Mexican peso, and the Saudi rial. Have these PPP exchange rates gone up or down over time? What accounts for the changes in these PPP exchange rates over time?
2Examine forecasts from www.onada.com for the British pound, the Japanese yen, and the euro.
(a)Which of these currencies are forecast to appreciate and which to depreciate?
(b)Compare these forecasts to the forward rates for the same maturity. Are the predicted exchange rates greater or less than the corresponding forward rates?
(c)Compare these forecasts to the actual exchange rates. How accurate were these forecasts?
(d)If you had followed these forecasts (by buying forward when the forecasted exchange rate exceeded the forward rate and selling forward when it was below the forward rate), would you have made or lost money?
Chapter 9: Managing Transaction Exposure and
Economic Exposure
Internet resources
www.sec.gov/edgar.shtml
The website of the Securities and Exchange Commission. The primary purpose of EDGAR – the Electronic Data Gathering, Analysis, and Retrieval system – is to increase the efficiency and fairness of the securities market for the benefit of investors, corporations, and the economy by accelerating the receipt, acceptance, dissemination, and analysis of time-sensitive corporate information filed with the agency.
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www.florin.com/v4/valore4d.html
The website of Valore International discusses issues related to currency risk management.
www.kshitij.com/risk/fxmgmain.shtml
The website of Kshitij consultancy services. Kshitij manages currency risk for corporate customers.
www.lehman.com/equities/pb/risk_management.htm
The website of Lehman Brothers. The firm’s risk management system extends comprehensive risk analysis and portfolio revaluation tools to portfolio managers, risk managers, and traders within a flexible reporting platform.
www.reportgallery.com
The website of the Report Gallery is the most complete and up-to-date listing of annual reports and related financial reports of 2,200 companies and covers the majority of the Fortune 500 companies.
www.pages.stern.nyu.edu/~igiddy/fxrisk.htm
This web page provides an overview of exchange risk management
Internet exercises
1Obtain an annual report of a major company, such as Sony Corp., from www.reportgallery.com, to answer the following questions. Are there any comments that relate to the company’s transaction exposure? Does it seem that the company hedges its transaction exposure? If so, what are the methods that it has used to hedge its exposure?
2Visit the websites of General Electric (GE), www.ge.com, and Disney, www.disney.com, to obtain their annual reports. Do these annual reports feature the goals and objectives of their currency risk management activities?
Chapter 10: Translation Exposure Management
Internet resources
www.accounting.rutgers.edu/raw/fasb/
The website of the Financial Accounting Standards Board provides information on FASB 8, FASB 52, and other FASB pronouncements on currency translation and hedge accounting.
www.iasc.org.uk
The home page of the International Accounting Standards Board. The IASB is an independent, privately funded accounting standards-setter, based in London, developing a single set of highquality, understandable, and enforceable global accounting standards.
www.reportgallery.com
A website that contains links to annual reports of over 2,200 companies, many of which are multinationals.
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www.standardandpoors.com
This is the home site of Standard & Poor’s, a provider of investment information such as bond ratings. Information about Standard & Poor’s can be found here.
www.jpmorgan.com
This is the site of J. P. Morgan and Company, an international investment banking firm. Detailed information about J. P. Morgan’s bond indexes can be found here.
Internet exercises
1Plot the US dollar value of the euro since its inception in January 1, 2002. How has the euro fared in the past year? You can use the website of the European Central Bank, at www.ecb.int.
2 What explanations have been given for the decline of the euro in the first two years of its existence? Search The Wall Street Journal (www.wsj.com) and The Economist (www.economist.com) to formulate your answer.
Chapter 12: International Banking Issues and
Country Risk Analysis
Internet resources
www.ny.frb.org/pihome/statistics/vrate.shtml
The web page of the Federal Reserve Bank of New York that takes you directly to data on implied volatilities for foreign-exchange options.
www.bis.org/public/index.htm
This website contains the BIS annual report, together with statistics on derivatives, external debt, and foreign-exchange market activity.
www.cme.com
The website of the Chicago Mercantile Exchange (CME) contains information and quotes on currency futures and options contracts.
www.phlx.com
The website of the Philadelphia Stock Exchange (PHLX) contains information and quotes on currency options contracts.
www.bis.org/cbanks.htm
This is the home page of the Bank for International Settlement. It provides links to central banks around the world.
Internet exercises
1Using Moody’s Investor services, www.moodys.com, and Standard & Poor’s ratings, www.standardpoors.com, obtain the sovereign debt ratings for two countries of your choice.
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2Visit the website of the Heritage Foundation (www.heritage.org) or that of the Internet Center for Corruption Research (www.icgg.org) to answer the following questions:
(a)Use the link to the Heritage Foundation to name the five most economically free countries and the five least economically free countries.
(b)Use the Internet Research for Corruption Research to name the five most corrupt countries and the five least corrupt countries.
(c)International capital flows: public and private major multinational organizations (some of which are listed below) attempt to track the relative movements and magnitudes of global capital investment. Using these websites and others that you may find, prepare a two-page executive briefing on the question of whether capital generated in the industrialized countries is finding its way to the less developed and emerging markets. Is there some critical distinction between “less developed” and “emerging” countries?
The World Bank |
www.worldbank.org/ |
OECD |
www.oecd.org/ |
European Bank for Reconstruction |
www.ebrd.org/ |
Chapter 13: Financing Foreign Trade
Internet resources
www.exim.gov
The website of the Export–Import Bank of the United States (Ex–Im Bank) contains information about trade financing and the Ex–Im Bank’s programs.
www.pefco.com
The website of the Private Export Funding Corporation (PEFCO) offers background information about PEFCO, describes their programs, and gives access to their annual report.
www.fcia.com
The website of the Foreign Credit Insurance Association contains the FCIA Country Update, which gives economic, political, and intelligence information on trade-related development and offers access to trade-related links.
Internet exercises
1Visit the website of the Private Export Funding Corporation (PEFCO), at www.pefco.com, to answer the following questions:
(a)What types of programs does PEFCO offer to US exporters?
(b)What are the three short-term facilities that PEFCO offers to lenders?
(c)What are the terms of the Short-Term Insured Loan Facility?
(d)What are under-serviced markets and how can under-serviced market programs benefit from the Lender-Of-Last-Resort Program?
2Visit the website of the Foreign Credit Insurance Association (FCIA), at www.fcia.com, to answer the following questions:
(a)What is FCIA’s special risk insurance?
(b)What are two conditions that affect and benefit trade?
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(c)Read the latest FCIA newsletter and Country Update. What country or region presents a high risk for exporters and would benefit from the special risk insurance?
Chapter 14: Financing Foreign Investment
Internet resources
www.worldbank.org
The website of the World Bank Group gives access to the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Center for Settlement of Investment Dispute (ICSID). You may access news items, agency reports, budgets, and annual reports for all the agencies listed.
www.bloomberg.com
The Bloomberg website contains a wide variety of data on financial markets worldwide, including foreign-exchange and interest rate data.
www.iadb.org
The website of the Inter-American Development Bank (IDB). The IDB is the largest regional multilateral development institution, and includes the USA and 19 Latin American countries. This site contains economic profiles by country and historical IDB lending data, plus news items, links to other organizations, and previews of private-sector projects.
www.ebrd.com
The website of the European Bank for Reconstruction and Development (EBRD) contains application information for project funding.
www.exim.gov
The website of the Export–Import Bank of the United States (Ex–Im Bank) contains information about trade financing and the Ex–Im Bank’s programs.
Internet exercises
1Visit the website of the World Bank Group at www.worldbank.org and read about the International Bank for Reconstruction and Development (IBRD).
(a)What was the amount of total lending in the last fiscal year? How many new operations were approved globally with this total amount?
(b)Describe the share of total lending per region as a percentage of the total fiscal lending. Which region received the highest share of total lending?
(c)What percentage of the total lending was allocated to the theme of Financial and Private Sector Development globally?
(d)What percentage of the total lending was allocated to the sector of Industry and Trade?
2Visit the website of the European Bank for Reconstruction and Development (EBRD), at www.ebrd.com. How does EBRD define large, medium, small, and microprojects in euros? Would an oil development in Azerbaijan qualify for a loan? What other services does EBRD provide?