Foreign Exchange and Money Markets: Theory, Practice and by Bob Steiner

By Bob Steiner

Floating premiums, central-bank intervention, derivatives buying and selling and the very excessive volumes of speculative and round the clock buying and selling are only the various features of the foreign currencies industry that make it a hugely dynamic and risky enviornment. This booklet addresses the sensible functions of forex trading and funds marketplace buying and selling and offers finished insurance of those markets. insurance comprises:

  • What the tools are
  • How and why they're used - by means of either financial institution purchasers and company end-users
  • How the several tools are associated one to another
  • How you rate them
  • Structure of the marketplace, EMU etc
  • The diversity of hazards bobbing up from dealings in those tools that impact banks and corporates
  • How those dangers are measured and controlled
  • Brings jointly a number sensible, correct fabric on foreign currency and funds marketplace trading
  • Focuses on buying and selling occasions in addition to on calculations
  • International in insurance, the recommendations and strategies coated will not be limited to any nation or institution

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Extra info for Foreign Exchange and Money Markets: Theory, Practice and Risk Management (Securities Institute Global Capital Markets)

Sample text

Commercial paper, for example, is a discount instrument. Consider, for example, commercial paper issued for 91 days with a face value of EUR 10 million. On maturity, the investor receives only the face value of EUR 10 million. 34 The idea that the amount paid is the present value is exactly the same here as in the previous chapter for coupon-bearing instruments. The difference in calculation arises only in that the coupon is zero here. 17%, when it is issued with 30 days’ maturity. 17%. 45 7 In the last example, the yield earned over the holding period of 7 days was calculated as shown in the section on ‘Calculating the yield on an investment or the cost of a borrowing’ in Chapter 2.

7 Which of the following is the cheapest for a borrower? 7% annual money market basis semi-annual money market basis annual bond basis semi-annual bond basis. 6%? 3% for a further 92 days. What is the simple cost of borrowing over the 9 months? This Page Intentionally Left Blank Part 2 Money Markets 3 Overview of money market instruments Introduction The term money market is used to include all short-term financial instruments which are based on an interest rate, whether the interest rate is actually paid (as in a cash deposit) or only implied in the way the instrument is priced and settled (as in an FRA).

Deposits and coupon-bearing instruments 47 This new result is then again added to the coupon payment actually made on that date and the combined total again discounted back. This process continues until the nearest coupon payment outstanding. The value thus reached is finally discounted back to the transaction settlement date. Throughout the process, both the calculation of each coupon payment and each discounting are performed using the exact number of days in the relevant coupon period. 5% per annum is issued on 16 May 2000 with a maturity of 5 years.

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