International Financial Markets - Assignment Point
International Financial Markets
Subject: International Business | Topics:

Learning Objectives:

To describe the background and corporate use of the following international financial markets:

–Foreign Exchange Market,
–Eurocurrency market,
–Eurocredit market,
–Eurobond market, and
–International stock markets.

Motives for Using International Financial Markets:

The International Financial Market are financial markets where individuals buy and sell foreign assets such as stock, Bonds, currencies. Its also a place were institutions lay down rules.The markets for real or financial assets are prevented from complete integration by barriers such as tax differentials, tariffs, quotas,labor immobility, communication costs, cultural differences, and financial reporting differences.Yet, these barriers can also create unique opportunities for specific geographic markets that will attract foreign investors.
Investors invest in foreign markets:
–to take advantage of favorable economic conditions;
–when they expect foreign currencies to appreciate against their own; and
–to reap the benefits of international diversification.
Creditors provide credit in foreign markets:
–to capitalize on higher foreign interest rates;
–when they expect foreign currencies to appreciate against their own; and
–to reap the benefits of international diversification.
Borrowers borrow in foreign markets:
–to capitalize on lower foreign interest rates; and
–when they expect foreign currencies to depreciate against their own.

Foreign Exchange Market:

The foreign exchange market allows currencies to be exchanged in order to facilitate international trade or financial transactions.

Foreign Exchange Transactions:

•There is no specific building or location where traders exchange currencies. Trading also occurs around the clock.
•The market for immediate exchange is known as the spot market.
•The forward market enables an MNC to lock in the exchange rate at which it will buy or sell a certain quantity of currency on a specified future date.
International Financial Markets

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