國際財務管理課后習題答案chapter5

1、IM1CHAPTER5THEMARKETFFEIGNEXCHANGESUGGESTEDANSWERSSOLUTIONSTOENDOFCHAPTERQUESTIONSPROBLEMSQUESTIONS1.Giveafulldefinitionofthemarketffeignexchange.Answer:Broadlydefinedthefeignexchange(FX)marketencompassestheconversionofp

2、urchasingpowerfromonecurrencyintoanotherbankdepositsoffeigncurrencytheextensionofcreditdenominatedinafeigncurrencyfeigntradefinancingtradinginfeigncurrencyoptionsfuturescontracts.2.Whatisthedifferencebetweentheretailclie

3、ntmarketthewholesaleinterbankmarketffeignexchangeAnswer:Themarketffeignexchangecanbeviewedasatwotiermarket.Onetieristhewholesaleinterbankmarkettheothertieristheretailclientmarket.InternationalbanksprovidetheceoftheFXmark

4、et.Theystwillingtobuysellfeigncurrencyftheirownaccount.Theseinternationalbanksservetheirretailclientscpationsindividualsinconductingfeigncommercemakinginternationalinvestmentinfinancialassetsthatrequiresfeignexchange.Ret

5、ailtransactionsaccountfonlyabout14percentofFXtrades.Theother86percentisinterbanktradesbetweeninternationalbanksnonbankdealerslargeenoughtotransactintheinterbankmarket.3.Whoarethemarketparticipantsinthefeignexchangemarket

6、Answer:ThemarketparticipantsthatcomprisetheFXmarketcanbecategizedintofivegroups:internationalbanksbankcustomersnonbankdealersFXbrokerscentralbanks.InternationalbanksprovidetheceoftheFXmarket.Approximately100to200bankswld

7、widemakeamarketinfeignexchangei.e.theystwillingtobuysellfeigncurrencyftheirownaccount.Theseinternationalbanksservetheirretailclientsthebankcustomersinconductingfeigncommercemakinginternationalinvestmentinfinancialassetst

8、hatrequiresfeignexchange.Nonbankdealersarelargenonbankfinancialinstitutionssuchasinvestmentbanksmutualfundspensionfundshedgefundswhosesizefrequencyoftradesmakeitcosteffectivetoestablishtheirowndealingroomstotradedirectly

9、intheinterbankmarketftheirfeignexchangeneeds.IM36.WhydoesmostinterbankcurrencytradingwldwideinvolvetheU.S.dollarAnswer:Tradingincurrencieswldwideisagainstacommoncurrencythathasinternationalappeal.ThatcurrencyhasbeentheU.

10、S.dollarsincetheendofWldWarII.HowevertheeuroJapaneseyenhavestartedtobeusedmuchmeasinternationalcurrenciesinrecentyears.Meimptantlytradingwouldbeexceedinglycumbersomedifficulttomanageifeachtradermadeamarketagainstallother

11、currencies.7.Banksfinditnecessarytoaccommodatetheirclients’needstobuysellFXfwardinmanyinstancesfhedgingpurposes.Howcanthebankeliminatethecurrencyexposureithascreatedfitselfbyaccommodatingaclient’sfwardtransactionAnswer:S

12、waptransactionsprovideameansfthebanktomitigatethecurrencyexposureinafwardtrade.Aswaptransactionisthesimultaneoussale(purchase)ofspotfeignexchangeagainstafwardpurchase(sale)ofanapproximatelyequalamountofthefeigncurrency.T

13、oillustratesupposeabankcustomerwantstobuydollarsthreemonthsfwardagainstBritishpoundsterling.Thebankcanhlethistradefitscustomersimultaneouslyneutralizetheexchangerateriskinthetradebyselling(browed)Britishpoundsterlingspot

14、againstdollars.Thebankwilllendthedollarsfthreemonthsuntiltheyareneededtodeliveragainstthedollarsithassoldfward.TheBritishpoundsreceivedwillbeusedtoliquidatethesterlingloan.8.ACD$banktraderiscurrentlyquotingasmallfigurebi

15、daskof3540whentherestofthemarketistradingatCD1.3436CD1.3441.Whatisimpliedaboutthetrader’sbeliefsbyhispricesAnswer:ThetradermustthinktheCanadiandollarisgoingtoappreciateagainsttheU.S.dollartherefeheistryingtoincreasehisin

16、ventyofCanadiandollarsbydiscouragingpurchasesofU.S.dollarsbystingwillingtobuy$atonlyCD1.3435$1.00offeringtosellfrominventyattheslightlylowerthanmarketpriceofCD1.3440$1.00.9.WhatistriangulararbitrageWhatisaconditionthatwi