International financial management:
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| Main Authors: | , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Upper Saddle River, NJ
Pearson Prentice Hall
2009
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| Edition: | Internat. ed. |
| Series: | The Prentice Hall series in finance
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| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XXVII, 810 S. graph. Darst. |
| ISBN: | 0136054900 9780136054900 |
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MARC
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| adam_text | : INTERNATIONAL FINANCIAL I MANAGEMENT GEERT BEKAERT COLUMBIA UNIVERSITY
AND THE NATIONAL BUREAU OF ECONOMIC RESEARCH ROBERT J. HODRICK COLUMBIA
UNIVERSITY AND THE NATIONAL BUREAU OF ECONOMIC RESEARCH PEARSOFSI
PEARSON EDUCATION INTERNATIONAL CONTENTS PREFACE XXIII PART I
INTRODUCTION TO FOREIGN EXCHANGE MARKETS AND RISKS 1 CHAPTER 1
GLOBALIZATION AND THE MULTINATIONAL CORPORATION 1 1.1 INTRODUCTION 1 1.2
GLOBALIZATION AND THE GROWTH OF INTERNATIONAL TRADE AND CAPITAL FLOWS 2
THE GROWTH OF INTERNATIONAL TRADE 2 THE GLOBALIZATION OF FINANCIAL
MARKETS 5 1.3 MULTINATIONAL CORPORATIONS 8 HOW MULTINATIONAL
CORPORATIONS ENTER FOREIGN MARKETS 10 THE GOALS OF AN MNC 10 CORPORATE
GOVERNANCE AROUND THE WORLD 12 MULTINATIONAL CORPORATIONS AND FOREIGN
DIRECT INVESTMENT 15 1.4 OTHER IMPORTANT INTERNATIONAL PLAYERS 18
INTERNATIONAL BANKS 18 INTERNATIONAL INSTITUTIONS 19 GOVERNMENTS 22
INSTITUTIONAL AND INDIVIDUAL INVESTORS 22 1.5 GLOBALIZATION AND THE
MULTINATIONAL FIRM: BENEFACTOR OR MENACE? 23 A ROCKY ROAD TO FREE TRADE
23 DO INTERNATIONAL CAPITAL FLOWS CAUSE HAVOC? 24 THE ANTI-GLOBALIST
MOVEMENT AND MNCS 26 SOME FINAL THOUGHTS ON GLOBALIZATION 28 1.6
OVERVIEW OF THE BOOK 29 PART I: INTRODUCTION TO FOREIGN EXCHANGE MARKETS
AND RISKS 29 PART II: INTERNATIONAL PARITY CONDITIONS AND EXCHANGE RATE
DETERMINATION 29 PART III: INTERNATIONAL CAPITAL MARKETS 30 PART IV:
INTERNATIONAL CORPORATE FINANCE 30 PART V: MANAGING ONGOING OPERATIONS
30 PART VI: FOREIGN CURRENCY DERIVATIVES 30 A FINAL INTRODUCTION 31 1.7
SUMMARY 32 BIBLIOGRAPHY 34 CHAPTER 2 THE FOREIGN EXCHANGE MARKET 36 2.1
THE ORGANIZATION OF THE FOREIGN EXCHANGE MARKET 36 SIZE OF THE MARKET 38
TYPES OF CONTRACTS TRADED 39 FOREIGN EXCHANGE DEALERS 39 FOREIGN
EXCHANGE BROKERS 39 COMPUTERIZED TRADING SYSTEMS 40 IX OTHER
PARTICIPANTS IN THE FOREX MARKET 40 THE COMPETITIVE MARKETPLACE 40 2.2
CURRENCY QUOTES AND PRICES 41 EXCHANGE RATES 42 EXCHANGE RATE QUOTES 42
VEHICLE CURRENCIES AND CURRENCY CROSS-RATES 46 TRIANGULAR ARBITRAGE 46
2.3 INSIDE THE INTERBANK MARKET I: BID-ASK SPREADS AND BANK PROFITS 51
BID-ASK SPREADS 51 THE MAGNITUDE OF BID-ASK SPREADS 53 BID-ASK SPREADS
ALL DAY AROUND THE WORLD 54 2.4 INSIDE THE INTERBANK MARKET II:
COMMUNICATIONS AND FUND TRANSFERS 56 COMMUNICATION SYSTEMS 56
CROSS-CURRENCY SETTLEMENT (OR HERSTATT) RISK 57 2.5 .DESCRIBING CHANGES
IN EXCHANGE RATES 59 RATES OF APPRECIATION AND DEPRECIATION 62
CONTINUOUSLY COMPOUNDED RATES OF APPRECIATION (ADVANCED) 63 2.6 SUMMARY
64 QUESTIONS 64 PROBLEMS 65 BIBLIOGRAPHY 65 APPENDIX: LOGARITHMS 66
CHAPTER 3 FORWARD MARKETS AND TRANSACTION EXCHANGE RISK 67 3.1
TRANSACTION EXCHANGE RISK 68 3.2 DESCRIBING UNCERTAIN FUTURE EXCHANGE
RATES 69 ASSESSING EXCHANGE RATE UNCERTAINTY USING HISTORICAL DATA 69
THE PROBABILITY DISTRIBUTION OF FUTURE EXCHANGE RATES 72 3.3 HEDGING
TRANSACTION EXCHANGE RISK 74 FORWARD CONTRACTS AND HEDGING 74 THE COSTS
AND BENEFITS OF A FORWARD HEDGE 77 EXAMPLES OF USING FORWARD CONTRACTS
TO HEDGE TRANSACTION RISK 78 3.4 THE FORWARD FOREIGN EXCHANGE MARKET 81
MARKET ORGANIZATION 81 FORWARD CONTRACT MATURITIES AND VALUE DATES 82
FORWARD MARKET BID-ASK SPREADS 83 NET SETTLEMENT 86 THE FOREIGN EXCHANGE
SWAP MARKET 87 3.5 FORWARD PREMIUMS AND DISCOUNTS 90 SIZES OF FORWARD
PREMIUMS OR DISCOUNTS 91 FORWARD PREMIUMS AND SWAP POINTS 91 3.6 CHANGES
IN EXCHANGE RATE VOLATILITY (ADVANCED) 92 VOLATILITY CLUSTERING 93 OTHER
VOLATILITY MODELS 95 3.7 SUMMARY 95 QUESTIONS 95 PROBLEMS 96
BIBLIOGRAPHY 96 APPENDIX: A STATISTICS REFRESHER 97 CONTENTS CHAPTER 4
THE BALANCE OF PAYMENTS 102 4.1 THE BALANCE OF PAYMENTS: CONCEPTS AND
TERMINOLOGY 102 MAJOR ACCOUNTS OF THE BALANCE OF PAYMENTS 102 A
DOUBLE-ENTRY ACCOUNTING SYSTEM 104 CURRENT ACCOUNT TRANSACTIONS 104
CAPITAL ACCOUNT TRANSACTIONS 107 OFFICIAL RESERVES ACCOUNT TRANSACTIONS
108 4.2 SURPLUSES AND DEFICITS IN THE BALANCE OF PAYMENTS ACCOUNTS 109
AN IMPORTANT BALANCE OF PAYMENTS IDENTITY 109 THE U.S. CURRENT ACCOUNT
109 THE U.S. CAPITAL AND FINANCIAL ACCOUNTS 111 BOP DEFICITS AND
SURPLUSES AND THE OFFICIAL SETTLEMENTS ACCOUNT 115 BALANCE OF PAYMENT
STATISTICS AROUND THE WORLD 116 4.3 THE DYNAMICS OF THE BOP 118 THE
TRADE ACCOUNT AND THE INVESTMENT INCOME ACCOUNT 118 ! COUNTRIES AS NET
CREDITORS OR NET DEBTORS 119 DATA ON INTERNATIONAL INVESTMENT POSITIONS
119 4.4 SAVINGS, INVESTMENT, INCOME, AND THE BOP 122 LINKING THE CURRENT
ACCOUNT TO NATIONAL INCOME 122 NATIONAL SAVINGS, INVESTMENT, AND THE
CURRENT ACCOUNT 123 CURRENT ACCOUNTS AND GOVERNMENT DEFICITS 123 WHAT
CAUSES CURRENT ACCOUNT DEFICITS AND SURPLUSES? 124 ASSESSING THE
OPENNESS OF INTERNATIONAL CAPITAL MARKETS 128 . 4.5 SUMMARY 129
QUESTIONS 130 PROBLEMS 131 BIBLIOGRAPHY 132 APPENDIX: A PRIMER ON
NATIONAL INCOME AND PRODUCT ACCOUNTS 133 CHAPTER 5 EXCHANGE RATE SYSTEMS
136 5.1 ALTERNATIVE EXCHANGE RATE ARRANGEMENTS AND CURRENCY RISK 136
EXCHANGE RATE SYSTEMS AROUND THE WORLD 136 CURRENCY RISKS IN ALTERNATIVE
EXCHANGE RATE SYSTEMS 140 TRENDS IN CURRENCY SYSTEMS 144 5.2 CENTRAL
BANKS 144 THE CENTRAL BANK S BALANCE SHEET 144 FOREIGN EXCHANGE
INTERVENTIONS 149 HOW DO CENTRAL BANKS PEG A CURRENCY? 150 5.3 FLEXIBLE
EXCHANGE RATE SYSTEMS 151 THE EFFECTS OF CENTRAL BANK INTERVENTIONS 152
EMPIRICAL EVIDENCE ON THE EFFECTIVENESS OF INTERVENTIONS 154 5.4 FIXED
EXCHANGE RATE SYSTEMS 155 THE INTERNATIONAL MONETARY SYSTEM BEFORE 1971:
A BRIEF HISTORY 155 PEGGED EXCHANGE RATE SYSTEMS IN DEVELOPING COUNTRIES
157 WHY NOT SIMPLY FLOAT? 160 CURRENCY BOARDS 161 DOLLARIZATION 163 5.5
LIMITED-FLEXIBILITY SYSTEMS: TARGET ZONES AND CRAWLING PEGS 163 TARGET
ZONES 163 CRAWLING PEGS 166 CONTENTS XI 5.6 HOW TO SEE AN EMU FLY: THE
ROAD TO MONETARY INTEGRATION IN EUROPE 168 THE EUROPEAN MONETARY SYSTEM
(EMS) 168 ON ECUS, EUROS, AND FRANKEN 169 WAS THE EMS SUCCESSFUL? 171
THE MAASTRICHT TREATY AND THE EURO 172 PROS AND CONS OF A MONETARY UNION
(ADVANCED) 173 5.7 SUMMARY 174 QUESTIONS 175 PROBLEMS 175 BIBLIOGRAPHY
176 PART II INTERNATIONAL PARITY CONDITIONS AND EXCHANGE RATE
DETERMINATION 178 R CHAPTER 6 INTEREST RATE PARITY 178 6.1 THE THEORY OF
COVERED INTEREST RATE PARITY 17 8 THE INTUITION BEHIND INTEREST RATE
PARITY 180 DERIVING INTEREST RATE PARITY 183 COVERED INTEREST ARBITRAGE
185 6.2 COVERED INTEREST RATE PARITY IN PRACTICE 188 THE EXTERNAL
CURRENCY MARKET 188 COVERED INTEREST ARBITRAGE WITH TRANSACTION COSTS
(ADVANCED) 190 6.3 PROBLEMS RELATED TO TESTING INTEREST RATE PARITY 196
DEFAULT RISKS 196 EXCHANGE CONTROLS 197 POLITICAL RISK 198 6.4 HEDGING
TRANSACTION RISK IN THE MONEY MARKET 201 HEDGING A FOREIGN CURRENCY
LIABILITY 201 HEDGING A FOREIGN CURRENCY RECEIVABLE 202 6.5 THE TERM
STRUCTURE OF FORWARD PREMIUMS AND DISCOUNTS 203 THE TERM STRUCTURE OF
INTEREST RATES 203 / LONG-TERM FORWARD RATES AND PREMIUMS 207 6.6
SUMMARY 209 QUESTIONS 210 PROBLEMS 211 BIBLIOGRAPHY 212 CHAPTER 7
SPECULATION AND RISK IN THE FOREIGN EXCHANGE MARKET 213 7.1 SPECULATING
IN THE FOREIGN EXCHANGE MARKET 213 UNCOVERED FOREIGN MONEY MARKET
INVESTMENTS 213 SPECULATING WITH FORWARD CONTRACTS 215 CURRENCY
SPECULATION AND PROFITS AND LOSSES 217 7.2 UNCOVERED INTEREST RATE
PARITY AND THE UNBIASEDNESS HYPOTHESIS 223 EXCHANGE RATE FORECASTS AND
MARKET EFFICIENCY 223 UNCOVERED INTEREST RATE PARITY 224 THE
UNBIASEDNESS HYPOTHESIS 225 7.3 RISK PREMIUMS IN THE FOREIGN EXCHANGE
MARKET 227 WHAT DETERMINES RISK PREMIUMS ? 228 FORMAL DERIVATION OF CAPM
RISK PREMIUMS (ADVANCED) 230 XII CONTENTS 7.4 UNCOVERED INTEREST RATE
PARITY AND THE UNBIASEDNESS HYPOTHESIS IN PRACTICE 231 INTERNATIONAL
PORTFOLIO MANAGEMENT 231 EXCHANGE RATE FORECASTING 231 EXCHANGE RATE
DETERMINATION 232 THE COST OF HEDGING 232 7.5 EMPIRICAL EVIDENCE ON THE
UNBIASEDNESS HYPOTHESIS 234 THE QUEST FOR A TEST 234 A TEST USING THE
SAMPLE MEANS 236 REGRESSION TESTS OF THE UNBIASEDNESS OF FORWARD RATES
238 7.6 ALTERNATIVE INTERPRETATIONS OF THE TEST RESULTS 240 RISK
PREMIUMS 241 DO SURVEY DATA REVEAL IRRATIONAL EXPECTATIONS? 242 PESO
PROBLEMS 243 1.1 SUMMARY 248 QUESTIONS 249 PROBLEMS 250 BIBLIOGRAPHY 251
APPENDIX 7.1: THE PORTFOLIO DIVERSIFICATION ARGUMENT AND THE CAPM 252
APPENDIX 7.2: A REGRESSION REFRESHER 255 CHAPTER 8 PURCHASING POWER
PARITY AND REAL EXCHANGE RATES 259 8.1 PRICE LEVELS AND PRICE INDEXES
260 THE GENERAL IDEA OF PURCHASING POWER 260 CALCULATING THE PRICE LEVEL
260 CALCULATING A PRICE INDEX 260 8.2 THE PURCHASING POWER OF A CURRENCY
262 INTERNAL PURCHASING POWER 262 EXTERNAL PURCHASING POWER 263 8.3
ABSOLUTE PURCHASING POWER PARITY 263 THE THEORY OF ABSOLUTE PURCHASING
POWER PARITY 263 GOODS MARKET ARBITRAGE 264 8.4 THE LAW OF ONE PRICE 265
THE PERFECT MARKET IDEAL 265 WHY VIOLATIONS OF THE LAW OF ONE PRICE
OCCUR 265 HOW WIDE IS THE BORDER? 268 8.5 DESCRIBING DEVIATIONS FROM PPP
269 OVERVALUATIONS AND UNDERVALUATIONS OF CURRENCIES 269 PREDICTIONS
BASED ON OVERVALUATIONS AND UNDERVALUATIONS 270 8.6 THE MACPPP STANDARD
271 THE BIG MAC AS A PRICE INDEX 271 COMPARING PRICES ACROSS COUNTRIES
271 SOME PREDICTIONS OF CURRENCY APPRECIATIONS 273 8.7 EXCHANGE RATES
AND ABSOLUTE PPPS USING CPI DATA 274 INTERPRETING THE CHARTS 274
DOLLAR-POUND DATA 2 75 DEUTSCHE MARK-DOLLAR DATA 276 YEN-DOLLAR DATA 276
CANADIAN DOLLAR-U.S. DOLLAR DATA 277 FRENCH FRANC-DEUTSCHE MARK DATA 278
ITALIAN LIRA-DEUTSCHE MARK DATA 278 MEXICAN PESO-DOLLAR DATA 279
CONTENTS XIII 8.8 EXPLAINING THE FAILURE OF ABSOLUTE PPP 280 CHANGES IN
RELATIVE PRICES 280 NON-TRADED GOODS 281 PPP DEVIATIONS AND THE BALANCE
OF PAYMENTS 282 8.9 COMPARING INCOMES ACROSS COUNTRIES 282 COMPARING
INCOMES IN NEW YORK AND TOKYO 282 COMPARING GDPS USING PPP EXCHANGE
RATES 284 8.10 RELATIVE PURCHASING POWER PARITY 285 A GENERAL EXPRESSION
FOR RELATIVE PPP 286 RELATIVE PPP WITH CONTINUOUSLY COMPOUNDED RATES OF
CHANGE (ADVANCED) 287 8.11 THE REAL EXCHANGE RATE 288 THE DEFINITION OF
THE REAL EXCHANGE RATE 288 REAL APPRECIATIONS AND REAL DEPRECIATIONS 289
TRADE-WEIGHTED REAL EXCHANGE RATES 291 8.12 S SUMMARY 292 QUESTIONS 293
PROBLEMS 294 BIBLIOGRAPHY 294 CHAPTER 9 MEASURING AND MANAGING REAL
EXCHANGE RISK 296 9.1 HOW REAL EXCHANGE RATES AFFECT REAL PROFITABILITY
296 THE REAL PROFITABILITY OF AN EXPORTING FIRM 297 9.2 REAL EXCHANGE
RISK AND THE PROFITABILITY OF DOMESTIC AND FOREIGN FIRMS 298 THE REAL
EXCHANGE RATE RISK OF A NET EXPORTER 299 THE REAL EXCHANGE RISK OF A NET
IMPORTER 300 THE REAL EXCHANGE RISK OF AN IMPORT COMPETITOR 302
MEASURING REAL EXCHANGE RISK EXPOSURE 302 9.3 SHARING THE REAL EXCHANGE
RISK: AN EXAMPLE 305 SAFE AIR S SITUATION 305 METALLWERKE A. G. S
PROPOSAL 305 THE CONSULTANT S TASK 306 BASIC DATA AND ANALYSIS 307
ANALYZING CONTRACTS WHEN INFLATION AND REAL EXCHANGE RATES ARE CHANGING
309 DESIGNING A CONTRACT THAT SHARES THE REAL EXCHANGE RISK 312 WOULD
THE REDESIGNED CONTRACT BE ADOPTED? 314 9.4 PRICING-TO-MARKET STRATEGIES
315 SOME EXAMPLES OF PRICING-TO-MARKET STRATEGIES 315 PRICING-TO-MARKET
BY A MONOPOLIST 316 A MONOPOLISTIC NET IMPORTER 319 EMPIRICAL EVIDENCE
ON PRICING-TO-MARKET 321 9.5 EVALUATING THE PERFORMANCE OF A FOREIGN
SUBSIDIARY 322 THREE TYPES OF SUBSIDIARIES 322 INITIAL OPERATING
PROFITABILITY 323 ACTUAL VERSUS FORECASTED OPERATING RESULTS 323
COMPARING THE OPTIMAL RESPONSE WITH NO RESPONSE BY MANAGERS 325 WHO
DESERVES A BONUS? 326 ASSESSING THE LONG-RUN VIABILITY OF A SUBSIDIARY
327 9.6 STRATEGIES FOR MANAGING REAL EXCHANGE RISK 328 TRANSITORY VERSUS
PERMANENT CHANGES IN REAL EXCHANGE RATES 328 XIV CONTENTS PRODUCTION
MANAGEMENT 329 MARKETING MANAGEMENT 330 9.7 SUMMARY 332 QUESTIONS 332
PROBLEMS 333 BIBLIOGRAPHY 333 CHAPTER 10 EXCHANGE RATE DETERMINATION AND
FORECASTING 335 10.1 PARITY CONDITIONS AND EXCHANGE RATE FORECASTS 335
THE FISHER HYPOTHESIS 336 THE INTERNATIONAL PARITY CONDITIONS 339 REAL
INTEREST RATES AND THE PARITY CONDITIONS 340 10.2 CURRENCY FORECASTING
TECHNIQUES 342 FUNDAMENTAL EXCHANGE RATE FORECASTING 342 T EXCHANGE RATE
FORECASTING WITH TECHNICAL ANALYSIS 343 EVALUATING FORECASTS 343 10.3
FUNDAMENTAL EXCHANGE RATE FORECASTING 346 THE ASSET MARKET APPROACH TO
EXCHANGE RATE DETERMINATION 346 STICKY PRICES AND OVERSHOOTING 348 THE
REAL EXCHANGE RATE AND THE REAL INTEREST RATE DIFFERENTIAL 350 THE REAL
EXCHANGE RATE AND THE CURRENT ACCOUNT 353 THE CAPITAL ACCOUNT AND REAL
EXCHANGE RATES 354 EQUILIBRIUM 354 VARIABLES THAT AFFECT THE REAL
EXCHANGE RATE-CURRENT ACCOUNT EQUILIBRIUM 355 FORECASTING PERFORMANCE OF
FUNDAMENTAL EXCHANGE RATE MODELS 356 10.4 TECHNICAL ANALYSIS 357 PURE
TECHNICAL ANALYSIS: CHARTISM 357 FILTER RULES 359 REGRESSION ANALYSIS
362 EVALUATING FORECASTING SERVICES 364 10.5 PREDICTING DEVALUATIONS 366
WHAT CAUSES A CURRENCY CRISIS? 367 EMPIRICAL EVIDENCE ON THE
PREDICTABILITY OF CURRENCY CRISES 368 10.6 SUMMARY 373 QUESTIONS 373
PROBLEMS 374 BIBLIOGRAPHY 375 PART III INTERNATIONAL CAPITAL MARKETS 378
CHAPTER 11 INTERNATIONAL DEBT FINANCING 378 11.1 THE GLOBAL SOURCES OF
FUNDS FOR INTERNATIONAL FIRMS 378 THE FINANCING MIX AROUND THE WORLD 379
11.2 THE CHARACTERISTICS OF DEBT INSTRUMENTS 380 CURRENCY OF
DENOMINATION 380 MATURITY 382 THE NATURE OF INTEREST RATE PAYMENTS:
FIXED-RATE VERSUS FLOATING-RATE DEBT 383 THE INTERNATIONAL CHARACTER OF
DEBT 385 CONTENTS XV 11.3 A TOUR OF THE WORLD S BOND MARKETS 386 SIZE
AND STRUCTURE OF THE WORLD BOND MARKET 386 THE INTERNATIONAL BOND MARKET
388 THE TYPES OF DEBT INSTRUMENTS IN THE INTERNATIONAL BOND MARKET AND
THEIR PREVALENCE 391 11.4 INTERNATIONAL BANKING 395 BANKS AS MNCS 396
TYPES OF INTERNATIONAL BANKING OFFICES 398 SMALL BELGIAN BANK CARVES OUT
A NICHE 400 INTERNATIONAL BANKING REGULATION 401 11.5 INTERNATIONAL BANK
LOANS 403 EUROCREDITS 403 THE EURONOTE MARKET 407 THE MAJOR DEBT
ARRANGERS 408 11.6 COMPARING THE COSTS OF DEBT 409 * THE ALL-IN-COST
PRINCIPLE 409 MINIMIZING THE COST OF DEBT INTERNATIONALLY 411 11.7
SUMMARY 419 QUESTIONS 420 PROBLEMS 420 BIBLIOGRAPHY 421 CHAPTER 12
INTERNATIONAL EQUITY FINANCING 423 12.1 A TOUR OF INTERNATIONAL STOCK
MARKETS 423 THE SIZE OF STOCK MARKETS 423 THE ORGANIZATION AND OPERATION
OF STOCK MARKETS 426 TURNOVER AND TRANSACTION COSTS 430 EMERGING STOCK
MARKETS 432 12.2 INTERNATIONAL CROSS-LISTING AND DEPOSITARY RECEIPTS 438
AMERICAN DEPOSITARY RECEIPTS 440 GLOBAL DEPOSITARY RECEIPTS 442 12.3 THE
ADVANTAGES AND DISADVANTAGES OF CROSS-LISTING 445 WHY FIRMS CHOOSE TO
CROSS-LIST 445 WHY FIRMS DECIDE AGAINST CROSS-LISTING 449 12.4 STRATEGIC
ALLIANCES 452 12.5 SUMMARY 453 QUESTIONS 454 PROBLEMS 454 BIBLIOGRAPHY
455 CHAPTER 13 INTERNATIONAL CAPITAL MARKET EQUILIBRIUM 457 13.1 RISK
AND RETURN OF INTERNATIONAL INVESTMENTS 457 THE TWO RISKS OF INVESTING
ABROAD 458 THE VOLATILITY OF INTERNATIONAL INVESTMENTS 459 EXPECTED
RETURNS 461 SHARPE RATIOS 462 13.2 THE BENEFITS OF INTERNATIONAL
DIVERSIFICATION 462 RISK REDUCTION THROUGH INTERNATIONAL DIVERSIFICATION
462 THE EFFECT OF INTERNATIONAL DIVERSIFICATION ON SHARPE RATIOS 466 XVI
CONTENTS 13.3 OPTIMAL PORTFOLIO ALLOCATIONS 469 PREFERENCES 469 THE CASE
OF ONE RISKY ASSET 470 THE MEAN STANDARD DEVIATION FRONTIER 473 13.4 THE
CAPITAL ASSET PRICING MODEL 475 ASSUMPTIONS AND ORIGINS 475 A DERIVATION
OF THE CAPM (ADVANCED) 476 INTERPRETING THE CAPM 477 DOMESTIC VERSUS
WORLD CAPMS 479 13.5 THE CAPM IN PRACTICE 481 A RECIPE FOR THE COST OF
EQUITY CAPITAL 482 THE BENCHMARK PROBLEM 482 BETA ESTIMATION 484 THE
RISK PREMIUM ON THE MARKET 485 13.6 INTEGRATED VERSUS SEGMENTED MARKETS
487 * INVESTING IN EMERGING MARKETS 487 THE COST OF CAPITAL IN
INTEGRATED AND SEGMENTED MARKETS 489 SEGMENTATION AND INTEGRATION OVER
TIME 491 HOME BIAS AND ITS IMPLICATIONS 493 13.7 ALTERNATIVE
COST-OF-CAPITAL MODELS 496 THE USEFULNESS OF THE CAPM 496 THE ARBITRAGE
PRICING THEORY 497 THE FAMA-FRENCH FACTOR MODEL 498 13.8 SUMMARY 500-
QUESTIONS 502 PROBLEMS 502 BIBLIOGRAPHY 503 CHAPTER 14 POLITICAL AND
COUNTRY RISK 507 14.1 POLITICAL RISK VERSUS COUNTRY RISK 507 COUNTRY
RISK 507 POLITICAL RISK FACTORS 509 THE DEBT CRISIS 511 14.2
INCORPORATING POLITICAL RISK IN CAPITAL BUDGETING 516 ADJUSTING EXPECTED
CASH FLOWS FOR POLITICAL RISK 517 ADJUSTING THE DISCOUNT RATE INSTEAD OF
CASH FLOWS 520 14.3 COUNTRY AND POLITICAL RISK ANALYSIS 522 COUNTRY RISK
RATINGS 522 THE PRS GROUP S 1CRG RATING SYSTEM 525 COUNTRY CREDIT
SPREADS 529 COMPUTING POLITICAL RISK PROBABILITIES 541 14.4 MANAGING
POLITICAL RISK 542 STRUCTURING AN INVESTMENT 542 INSURANCE 543 PROJECT
FINANCE 547 14.5 SUMMARY 550 QUESTIONS 551 PROBLEMS 551 BIBLIOGRAPHY 552
CONTENTS XVII PART IV INTERNATIONAL CORPORATE FINANCE 555 CHAPTER 15
INTERNATIONAL CAPITAL BUDGETING 555 15.1 AN OVERVIEW OF ADJUSTED NET
PRESENT VALUE 555 STEP 1: DISCOUNT THE CASH FLOWS OF THE ALL-EQUITY FIRM
556 STEP 2: ADD THE VALUE OF THE FINANCIAL SIDE EFFECTS 556 STEP 3:
VALUE THE GROWTH OPTIONS 557 15.2 DERIVING THE NPV OF FREE CASH FLOW 557
INCREMENTAL PROFITS 558 REVENUES 559 COSTS 559 EARNINGS BEFORE INTEREST
AND TAXES (EBIT) 559 NET OPERATING PROFIT LESS ADJUSTED TAXES (NOPLAT)
559 GROSS CASH FLOW 560 L FREE CASH FLOW 560 DISCOUNTING FREE CASH FLOWS
560 15.3 FINANCIAL SIDE EFFECTS 562 THE COSTS OF ISSUING SECURITIES 562
TAX SHIELDS FOR CERTAIN SECURITIES 562 THE PROPER DISCOUNT RATE 563
COSTS OF FINANCIAL DISTRESS 564 * THE EQUILIBRIUM AMOUNT OF DEBT 564
SUBSIDIZED FINANCING 565 15.4 GROWTH OPTIONS 566 PROBLEMS WITH THE
DISCOUNTED CASH FLOW APPROACH 567 15.5 PARENT VERSUS SUBSIDIARY CASH
FLOWS 568 A THREE-STEP APPROACH TO DETERMINING THE VALUE OF A FOREIGN
SUBSIDIARY 569 15.6 THE CASE OF INTERNATIONAL WOOD PRODUCTS 569
IWPI-SPAIN S FREE CASH FLOWS 570 THE PARENT COMPANY S PERSPECTIVE 576
VALUING THE FINANCIAL SIDE EFFECTS 580 THE FULL ANPV OF IWPI-SPAIN 582
THE CANNIBALIZATION OF EXPORT SALES 583 15.7 SUMMARY 584 QUESTIONS 585
PROBLEMS 586 BIBLIOGRAPHY 587 APPENDIX: DERIVING THE VALUE OF A
PERPETUITY 587 CHAPTER 16 ADDITIONAL TOPICS IN INTERNATIONAL CAPITAL
BUDGETING 589 16.1 ALTERNATIVE APPROACHES TO CAPITAL BUDGETING 590 THE
ANPV APPROACH 590 TWO VALUATION ALTERNATIVES TO ANPV 590 THE WACC
APPROACH TO CAPITAL BUDGETING 590 THE FLOW-TO-EQUITY METHOD OF CAPITAL
BUDGETING 596 THE PROS AND CONS OF ALTERNATIVE CAPITAL BUDGETING METHODS
597 16.2 FORECASTING CASH FLOWS OF FOREIGN PROJECTS 598 THE CHOICE OF
CURRENCY 598 RECONCILING THE TWO METHODS FOR DISCOUNTING FOREIGN CASH
FLOWS 598 XVIII CONTENTS 16.3 CASE STUDY: CMTC S AUSTRALIAN PROJECT 600
THE AUSTRALIAN INVESTMENT PROPOSAL 600 GATHERING THE ECONOMIC DATA 601
DISCOUNTED CASH FLOWS 603 CASE SOLUTION 603 THE EXPECTED REAL
APPRECIATION OF THE U.S. DOLLAR 610 16.4 TERMINAL VALUE WHEN ROI EQUALS
R WACC 611 TERMINAL VALUE WITH PERPETUAL GROWTH 611 EQUILIBRIUM RATE OF
RETURN ON INVESTMENT 611 16.5 TAX SHIELDS ON FOREIGN CURRENCY BORROWING
614 THE TAX IMPLICATIONS OF BORROWING IN A FOREIGN CURRENCY 614 FOREIGN
CURRENCY BORROWING BY BANANA COMPUTERS 615 16.6 CONFLICTS BETWEEN
BONDHOLDERS AND STOCKHOLDERS 619 THE INCENTIVE TO TAKE RISKS 619 THE
UNDERINVESTMENT PROBLEM 620 OTHER MANAGERIAL PROBLEMS CAUSED BY
FINANCIAL DISTRESS 622 16.7 INTERNATIONAL DIFFERENCES IN ACCOUNTING
STANDARDS 622 16.8 SUMMARY 623 QUESTIONS 623 PROBLEMS 624 BIBLIOGRAPHY
624 CHAPTER 17 RISK MANAGEMENT AND THE FOREIGN CURRENCY HEDGING DECISION
625 17.1 TO HEDGE OR NOT TO HEDGE 625 HEDGING IN AN ENTREPRENEURIAL
VENTURE 626 HEDGING IN A MODERN CORPORATION 626 THE
HEDGING-IS-IRRELEVANT LOGIC OF MODIGLIANI AND MILLER 627 17.2 ARGUMENTS
AGAINST HEDGING 628 HEDGING IS COSTLY 628 HEDGING EQUITY RISK IS
DIFFICULT, IF NOT IMPOSSIBLE 629 HEDGING CAN CREATE BAD INCENTIVES 634
17.3 ARGUMENTS FOR HEDGING 634 HEDGING CAN REDUCE THE FIRM S EXPECTED
TAXES 634 HEDGING CAN LOWER THE COSTS OF FINANCIAL DISTRESS 639 HEDGING
CAN IMPROVE THE FIRM S FUTURE INVESTMENT DECISIONS 640 HEDGING CAN
CHANGE THE ASSESSMENT OF A FIRM S MANAGERS 640 17.4 MERCK S HEDGING
RATIONALE 642 DEVELOPING NATURAL OPERATING HEDGES 643 MERCK S FIVE-STEP
PROCEDURE 643 17.5 HEDGING TRENDS 645 INFORMATION FROM SURVEYS 645
EMPIRICAL ANALYSIS OF WHY FIRMS HEDGE 646 TO HEDGE OR NOT TO HEDGE:
UNDERSTANDING YOUR COMPETITORS 646 17.6 SUMMARY 647 QUESTIONS 647
PROBLEMS 648 BIBLIOGRAPHY 649 CONTENTS XIX PARTV MANAGING ONGOING
OPERATIONS 650 CHAPTER 18 FINANCING INTERNATIONAL TRADE 650 18.1 THE
FUNDAMENTAL PROBLEM WITH INTERNATIONAL TRADE 650 18.2 INTERNATIONAL
TRADE DOCUMENTS 652 BILLS OF LADING 653 COMMERCIAL INVOICES 654 PACKING
LISTS 654 INSURANCE 654 CONSULAR INVOICE 655 CERTIFICATE OF ANALYSIS 655
18.3 METHODS OF PAYMENT 655 CASH IN ADVANCE 655 DOCUMENTARY CREDITS 656
DOCUMENTARY COLLECTIONS 661 & SALES ON OPEN ACCOUNT 662 INTERNATIONAL
FINANCING ON THE INTERNET 663 18.4 FINANCING EXPORTS 663 BANK LINE OF
CREDIT 663 BANKER S ACCEPTANCES 664 BUYER CREDIT 665 SELLING ACCOUNTS
RECEIVABLE 665 LIMITED-RECOURSE FINANCING: FORFAITING 665 EXPORT
FACTORING 666 GOVERNMENT SOURCES OF EXPORT FINANCING AND CREDIT
INSURANCE 668 18.5 COUNTERTRADE 670 TRANSACTIONS WITHOUT MONEY 671
COUNTERTRADE INVOLVING MONEY OR CREDIT 672 18.6 SUMMARY 673 QUESTIONS
674 BIBLIOGRAPHY 675 CHAPTER 19 MANAGING NET WORKING CAPITAL 676 19.1
THE PURPOSE OF NET WORKING CAPITAL 676 INVENTORIES AS ASSETS 677 OTHER
CURRENT ASSETS 677 SHORT-TERM LIABILITIES 677 19.2 INTERNATIONAL CASH
MANAGEMENT 678 CONSTRAINTS ON INTERNATIONAL CASH MANAGEMENT 678 CASH
MANAGEMENT WITH A CENTRALIZED POOL 678 19.3 CASH TRANSFERS FROM
AFFILIATES TO PARENTS 685 INTERNATIONAL DIVIDEND CASH FLOWS 685
INTERNATIONAL ROYALTY AND MANAGEMENT-FEE CASH FLOWS 686 TRANSFER PRICING
AND CASH FLOWS 687 STRATEGIES FOR DEALING WITH BLOCKED FUNDS 693 19.4
MANAGING ACCOUNTS RECEIVABLE 695 CURRENCY OF DENOMINATION 695 LEADING
AND LAGGING PAYMENTS 698 CREDIT TERMS 700 19.5 INVENTORY MANAGEMENT 700
OPTIMAL INVENTORY THEORY 700 XX CONTENTS 19.6 SUMMARY 703 QUESTIONS 704
PROBLEMS 705 BIBLIOGRAPHY 706 PART VI FOREIGN CURRENCY DERIVATIVES 707
CHAPTER 20 FOREIGN CURRENCY FUTURES AND OPTIONS 707 20.1 THE BASICS OF
FUTURES CONTRACTS 707 FUTURES VERSUS FORWARDS 707 THE PRICING OF FUTURES
CONTRACTS 711 20.2 HEDGING TRANSACTION RISK WITH FUTURES 714 HEDGING AT
NANCY FOODS 714 POTENTIAL PROBLEMS WITH A FUTURES HEDGE 716 * 20.3
BASICS OF FOREIGN CURRENCY OPTION CONTRACTS 719 BASIC OPTION TERMINOLOGY
719 OPTIONS TRADING 722 20.4 THE USE OF OPTIONS IN RISK MANAGEMENT 725 A
BIDDING SITUATION AT BAGWELL CONSTRUCTION 725 USING OPTIONS TO HEDGE
TRANSACTION RISK 726 HEDGING WITH OPTIONS AS BUYING INSURANCE 731
SPECULATING WITH OPTIONS 735 OPTIONS VALUATION 738 20.5 COMBINATIONS OF
OPTIONS AND EXOTIC OPTIONS 743 RANGE FORWARDS AND CYLINDER OPTIONS 744
OTHER EXOTIC OPTIONS 746 20.6 SUMMARY 747 QUESTIONS 748 PROBLEMS 749
BIBLIOGRAPHY 750 CHAPTER 21 INTEREST RATE AND FOREIGN CURRENCY SWAPS 751
21.1 INTRODUCTION TO SWAPS 751 CURRENCY SWAPS VERSUS INTEREST RATE SWAPS
752 THE SIZE OF THE SWAP MARKETS 753 21.2 INTEREST RATE SWAPS 754
INTEREST RATE RISK 755 THE NATURE OF INTEREST RATE SWAP CONTRACTS 756
THE PROFITABILITY OF INTEREST RATE SWAPS 757 DEALING WITH CREDIT RISKS:
REQUIRING COLLATERAL AND MARKING TO MARKET 758 21.3 FOREIGN CURRENCY
SWAPS 758 THE MECHANICS OF MODERN CURRENCY SWAPS 760 COMPARATIVE
BORROWING ADVANTAGES IN MATCHED CURRENCY SWAPS 762 SWAPPING BOND
PROCEEDS AND COUPON RATES WITH QUOTED SWAP RATES 768 CURRENCY SWAPS AS A
PACKAGE OF FORWARD CONTRACTS 772 THE VALUE OF A CURRENCY SWAP 773 THE
RATIONALE FOR CURRENCY SWAPS 774 21.4 PARALLEL LOANS AND BACK-TO-BACK
LOANS 775 PARALLEL LOANS 776 BACK-TO-BACK LOANS 778 CONTENTS XXI 21.5
SUMMARY 779 QUESTIONS 779 PROBLEMS 780 BIBLIOGRAPHY 781 GLOSSARY 783
INDEX 797 XXII CONTENTS
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: INTERNATIONAL FINANCIAL I MANAGEMENT GEERT BEKAERT COLUMBIA UNIVERSITY
AND THE NATIONAL BUREAU OF ECONOMIC RESEARCH ROBERT J. HODRICK COLUMBIA
UNIVERSITY AND THE NATIONAL BUREAU OF ECONOMIC RESEARCH PEARSOFSI
PEARSON EDUCATION INTERNATIONAL CONTENTS PREFACE XXIII PART I
INTRODUCTION TO FOREIGN EXCHANGE MARKETS AND RISKS 1 CHAPTER 1
GLOBALIZATION AND THE MULTINATIONAL CORPORATION 1 1.1 INTRODUCTION 1 1.2
GLOBALIZATION AND THE GROWTH OF INTERNATIONAL TRADE AND CAPITAL FLOWS 2
THE GROWTH OF INTERNATIONAL TRADE 2 THE GLOBALIZATION OF FINANCIAL
MARKETS 5 1.3 MULTINATIONAL CORPORATIONS 8 HOW MULTINATIONAL
CORPORATIONS ENTER FOREIGN MARKETS 10 THE GOALS OF AN MNC 10 CORPORATE
GOVERNANCE AROUND THE WORLD 12 MULTINATIONAL CORPORATIONS AND FOREIGN
DIRECT INVESTMENT 15 1.4 OTHER IMPORTANT INTERNATIONAL PLAYERS 18
INTERNATIONAL BANKS 18 INTERNATIONAL INSTITUTIONS 19 GOVERNMENTS 22
INSTITUTIONAL AND INDIVIDUAL INVESTORS 22 1.5 GLOBALIZATION AND THE
MULTINATIONAL FIRM: BENEFACTOR OR MENACE? 23 A ROCKY ROAD TO FREE TRADE
23 DO INTERNATIONAL CAPITAL FLOWS CAUSE HAVOC? 24 THE ANTI-GLOBALIST
MOVEMENT AND MNCS 26 SOME FINAL THOUGHTS ON GLOBALIZATION 28 1.6
OVERVIEW OF THE BOOK 29 PART I: INTRODUCTION TO FOREIGN EXCHANGE MARKETS
AND RISKS 29 PART II: INTERNATIONAL PARITY CONDITIONS AND EXCHANGE RATE
DETERMINATION 29 PART III: INTERNATIONAL CAPITAL MARKETS 30 PART IV:
INTERNATIONAL CORPORATE FINANCE 30 PART V: MANAGING ONGOING OPERATIONS
30 PART VI: FOREIGN CURRENCY DERIVATIVES 30 A FINAL INTRODUCTION 31 1.7
SUMMARY 32 BIBLIOGRAPHY 34 CHAPTER 2 THE FOREIGN EXCHANGE MARKET 36 2.1
THE ORGANIZATION OF THE FOREIGN EXCHANGE MARKET 36 SIZE OF THE MARKET 38
TYPES OF CONTRACTS TRADED 39 FOREIGN EXCHANGE DEALERS 39 FOREIGN
EXCHANGE BROKERS 39 COMPUTERIZED TRADING SYSTEMS 40 IX OTHER
PARTICIPANTS IN THE FOREX MARKET 40 THE COMPETITIVE MARKETPLACE 40 2.2
CURRENCY QUOTES AND PRICES 41 EXCHANGE RATES 42 EXCHANGE RATE QUOTES 42
VEHICLE CURRENCIES AND CURRENCY CROSS-RATES 46 TRIANGULAR ARBITRAGE 46
2.3 INSIDE THE INTERBANK MARKET I: BID-ASK SPREADS AND BANK PROFITS 51
BID-ASK SPREADS 51 THE MAGNITUDE OF BID-ASK SPREADS 53 BID-ASK SPREADS
ALL DAY AROUND THE WORLD 54 2.4 INSIDE THE INTERBANK MARKET II:
COMMUNICATIONS AND FUND TRANSFERS 56 COMMUNICATION SYSTEMS 56
CROSS-CURRENCY SETTLEMENT (OR HERSTATT) RISK 57 2.5 .DESCRIBING CHANGES
IN EXCHANGE RATES 59 RATES OF APPRECIATION AND DEPRECIATION 62
CONTINUOUSLY COMPOUNDED RATES OF APPRECIATION (ADVANCED) 63 2.6 SUMMARY
64 QUESTIONS 64 PROBLEMS 65 BIBLIOGRAPHY 65 APPENDIX: LOGARITHMS 66
CHAPTER 3 FORWARD MARKETS AND TRANSACTION EXCHANGE RISK 67 3.1
TRANSACTION EXCHANGE RISK 68 3.2 DESCRIBING UNCERTAIN FUTURE EXCHANGE
RATES 69 ASSESSING EXCHANGE RATE UNCERTAINTY USING HISTORICAL DATA 69
THE PROBABILITY DISTRIBUTION OF FUTURE EXCHANGE RATES 72 3.3 HEDGING
TRANSACTION EXCHANGE RISK 74 FORWARD CONTRACTS AND HEDGING 74 THE COSTS
AND BENEFITS OF A FORWARD HEDGE 77 EXAMPLES OF USING FORWARD CONTRACTS
TO HEDGE TRANSACTION RISK 78 3.4 THE FORWARD FOREIGN EXCHANGE MARKET 81
MARKET ORGANIZATION 81 FORWARD CONTRACT MATURITIES AND VALUE DATES 82
FORWARD MARKET BID-ASK SPREADS 83 NET SETTLEMENT 86 THE FOREIGN EXCHANGE
SWAP MARKET 87 3.5 FORWARD PREMIUMS AND DISCOUNTS 90 SIZES OF FORWARD
PREMIUMS OR DISCOUNTS 91 FORWARD PREMIUMS AND SWAP POINTS 91 3.6 CHANGES
IN EXCHANGE RATE VOLATILITY (ADVANCED) 92 VOLATILITY CLUSTERING 93 OTHER
VOLATILITY MODELS 95 3.7 SUMMARY 95 QUESTIONS 95 PROBLEMS 96
BIBLIOGRAPHY 96 APPENDIX: A STATISTICS REFRESHER 97 CONTENTS CHAPTER 4
THE BALANCE OF PAYMENTS 102 4.1 THE BALANCE OF PAYMENTS: CONCEPTS AND
TERMINOLOGY 102 MAJOR ACCOUNTS OF THE BALANCE OF PAYMENTS 102 A
DOUBLE-ENTRY ACCOUNTING SYSTEM 104 CURRENT ACCOUNT TRANSACTIONS 104
CAPITAL ACCOUNT TRANSACTIONS 107 OFFICIAL RESERVES ACCOUNT TRANSACTIONS
108 4.2 SURPLUSES AND DEFICITS IN THE BALANCE OF PAYMENTS ACCOUNTS 109
AN IMPORTANT BALANCE OF PAYMENTS IDENTITY 109 THE U.S. CURRENT ACCOUNT
109 THE U.S. CAPITAL AND FINANCIAL ACCOUNTS 111 BOP DEFICITS AND
SURPLUSES AND THE OFFICIAL SETTLEMENTS ACCOUNT 115 BALANCE OF PAYMENT
STATISTICS AROUND THE WORLD 116 4.3 THE DYNAMICS OF THE BOP 118 THE
TRADE ACCOUNT AND THE INVESTMENT INCOME ACCOUNT 118 ! COUNTRIES AS NET
CREDITORS OR NET DEBTORS 119 DATA ON INTERNATIONAL INVESTMENT POSITIONS
119 4.4 SAVINGS, INVESTMENT, INCOME, AND THE BOP 122 LINKING THE CURRENT
ACCOUNT TO NATIONAL INCOME 122 NATIONAL SAVINGS, INVESTMENT, AND THE
CURRENT ACCOUNT 123 CURRENT ACCOUNTS AND GOVERNMENT DEFICITS 123 WHAT
CAUSES CURRENT ACCOUNT DEFICITS AND SURPLUSES? 124 ASSESSING THE
OPENNESS OF INTERNATIONAL CAPITAL MARKETS 128 . 4.5 SUMMARY 129
QUESTIONS 130 PROBLEMS 131 BIBLIOGRAPHY 132 APPENDIX: A PRIMER ON
NATIONAL INCOME AND PRODUCT ACCOUNTS 133 CHAPTER 5 EXCHANGE RATE SYSTEMS
136 5.1 ALTERNATIVE EXCHANGE RATE ARRANGEMENTS AND CURRENCY RISK 136
EXCHANGE RATE SYSTEMS AROUND THE WORLD 136 CURRENCY RISKS IN ALTERNATIVE
EXCHANGE RATE SYSTEMS 140 TRENDS IN CURRENCY SYSTEMS 144 5.2 CENTRAL
BANKS 144 THE CENTRAL BANK'S BALANCE SHEET 144 FOREIGN EXCHANGE
INTERVENTIONS 149 HOW DO CENTRAL BANKS PEG A CURRENCY? 150 5.3 FLEXIBLE
EXCHANGE RATE SYSTEMS 151 THE EFFECTS OF CENTRAL BANK INTERVENTIONS 152
EMPIRICAL EVIDENCE ON THE EFFECTIVENESS OF INTERVENTIONS 154 5.4 FIXED
EXCHANGE RATE SYSTEMS 155 THE INTERNATIONAL MONETARY SYSTEM BEFORE 1971:
A BRIEF HISTORY 155 PEGGED EXCHANGE RATE SYSTEMS IN DEVELOPING COUNTRIES
157 WHY NOT SIMPLY FLOAT? 160 CURRENCY BOARDS 161 DOLLARIZATION 163 5.5
LIMITED-FLEXIBILITY SYSTEMS: TARGET ZONES AND CRAWLING PEGS 163 TARGET
ZONES 163 CRAWLING PEGS 166 CONTENTS XI 5.6 HOW TO SEE AN EMU FLY: THE
ROAD TO MONETARY INTEGRATION IN EUROPE 168 THE EUROPEAN MONETARY SYSTEM
(EMS) 168 ON ECUS, EUROS, AND FRANKEN 169 WAS THE EMS SUCCESSFUL? 171
THE MAASTRICHT TREATY AND THE EURO 172 PROS AND CONS OF A MONETARY UNION
(ADVANCED) 173 5.7 SUMMARY 174 QUESTIONS 175 PROBLEMS 175 BIBLIOGRAPHY
176 PART II INTERNATIONAL PARITY CONDITIONS AND EXCHANGE RATE
DETERMINATION 178 R CHAPTER 6 INTEREST RATE PARITY 178 6.1 THE THEORY OF
COVERED INTEREST RATE PARITY 17 8 THE INTUITION BEHIND INTEREST RATE
PARITY 180 DERIVING INTEREST RATE PARITY 183 COVERED INTEREST ARBITRAGE
185 6.2 COVERED INTEREST RATE PARITY IN PRACTICE 188 THE EXTERNAL
CURRENCY MARKET 188 COVERED INTEREST ARBITRAGE WITH TRANSACTION COSTS
(ADVANCED) 190 6.3 PROBLEMS RELATED TO TESTING INTEREST RATE PARITY 196
DEFAULT RISKS 196 EXCHANGE CONTROLS 197 POLITICAL RISK 198 6.4 HEDGING
TRANSACTION RISK IN THE MONEY MARKET 201 HEDGING A FOREIGN CURRENCY
LIABILITY 201 HEDGING A FOREIGN CURRENCY RECEIVABLE 202 6.5 THE TERM
STRUCTURE OF FORWARD PREMIUMS AND DISCOUNTS 203 THE TERM STRUCTURE OF
INTEREST RATES 203 /' LONG-TERM FORWARD RATES AND PREMIUMS 207 6.6
SUMMARY 209 QUESTIONS 210 PROBLEMS 211 BIBLIOGRAPHY 212 CHAPTER 7
SPECULATION AND RISK IN THE FOREIGN EXCHANGE MARKET 213 7.1 SPECULATING
IN THE FOREIGN EXCHANGE MARKET 213 UNCOVERED FOREIGN MONEY MARKET
INVESTMENTS 213 SPECULATING WITH FORWARD CONTRACTS 215 CURRENCY
SPECULATION AND PROFITS AND LOSSES 217 7.2 UNCOVERED INTEREST RATE
PARITY AND THE UNBIASEDNESS HYPOTHESIS 223 EXCHANGE RATE FORECASTS AND
MARKET EFFICIENCY 223 UNCOVERED INTEREST RATE PARITY 224 THE
UNBIASEDNESS HYPOTHESIS 225 7.3 RISK PREMIUMS IN THE FOREIGN EXCHANGE
MARKET 227 WHAT DETERMINES RISK PREMIUMS ? 228 FORMAL DERIVATION OF CAPM
RISK PREMIUMS (ADVANCED) 230 XII CONTENTS 7.4 UNCOVERED INTEREST RATE
PARITY AND THE UNBIASEDNESS HYPOTHESIS IN PRACTICE 231 INTERNATIONAL
PORTFOLIO MANAGEMENT 231 EXCHANGE RATE FORECASTING 231 EXCHANGE RATE
DETERMINATION 232 THE COST OF HEDGING 232 7.5 EMPIRICAL EVIDENCE ON THE
UNBIASEDNESS HYPOTHESIS 234 THE QUEST FOR A TEST 234 A TEST USING THE
SAMPLE MEANS 236 REGRESSION TESTS OF THE UNBIASEDNESS OF FORWARD RATES
238 7.6 ALTERNATIVE INTERPRETATIONS OF THE TEST RESULTS 240 RISK
PREMIUMS 241 DO SURVEY DATA REVEAL IRRATIONAL EXPECTATIONS? 242 PESO
PROBLEMS 243 1.1 SUMMARY 248 QUESTIONS 249 PROBLEMS 250 BIBLIOGRAPHY 251
APPENDIX 7.1: THE PORTFOLIO DIVERSIFICATION ARGUMENT AND THE CAPM 252
APPENDIX 7.2: A REGRESSION REFRESHER 255 CHAPTER 8 PURCHASING POWER
PARITY AND REAL EXCHANGE RATES 259 8.1 PRICE LEVELS AND PRICE INDEXES
260 THE GENERAL IDEA OF PURCHASING POWER 260 CALCULATING THE PRICE LEVEL
260 CALCULATING A PRICE INDEX 260 8.2 THE PURCHASING POWER OF A CURRENCY
262 INTERNAL PURCHASING POWER 262 EXTERNAL PURCHASING POWER 263 8.3
ABSOLUTE PURCHASING POWER PARITY 263 THE THEORY OF ABSOLUTE PURCHASING
POWER PARITY 263 GOODS MARKET ARBITRAGE 264 8.4 THE LAW OF ONE PRICE 265
THE PERFECT MARKET IDEAL 265 WHY VIOLATIONS OF THE LAW OF ONE PRICE
OCCUR 265 HOW WIDE IS THE BORDER? 268 8.5 DESCRIBING DEVIATIONS FROM PPP
269 OVERVALUATIONS AND UNDERVALUATIONS OF CURRENCIES 269 PREDICTIONS
BASED ON OVERVALUATIONS AND UNDERVALUATIONS 270 8.6 THE MACPPP STANDARD
271 THE BIG MAC AS A PRICE INDEX 271 COMPARING PRICES ACROSS COUNTRIES
271 SOME PREDICTIONS OF CURRENCY APPRECIATIONS 273 8.7 EXCHANGE RATES
AND ABSOLUTE PPPS USING CPI DATA 274 INTERPRETING THE CHARTS 274
DOLLAR-POUND DATA 2 75 DEUTSCHE MARK-DOLLAR DATA 276 YEN-DOLLAR DATA 276
CANADIAN DOLLAR-U.S. DOLLAR DATA 277 FRENCH FRANC-DEUTSCHE MARK DATA 278
ITALIAN LIRA-DEUTSCHE MARK DATA 278 MEXICAN PESO-DOLLAR DATA 279
CONTENTS XIII 8.8 EXPLAINING THE FAILURE OF ABSOLUTE PPP 280 CHANGES IN
RELATIVE PRICES 280 NON-TRADED GOODS 281 PPP DEVIATIONS AND THE BALANCE
OF PAYMENTS 282 8.9 COMPARING INCOMES ACROSS COUNTRIES 282 COMPARING
INCOMES IN NEW YORK AND TOKYO 282 COMPARING GDPS USING PPP EXCHANGE
RATES 284 8.10 RELATIVE PURCHASING POWER PARITY 285 A GENERAL EXPRESSION
FOR RELATIVE PPP 286 RELATIVE PPP WITH CONTINUOUSLY COMPOUNDED RATES OF
CHANGE (ADVANCED) 287 8.11 THE REAL EXCHANGE RATE 288 THE DEFINITION OF
THE REAL EXCHANGE RATE 288 REAL APPRECIATIONS AND REAL DEPRECIATIONS 289
TRADE-WEIGHTED REAL EXCHANGE RATES 291 8.12 S SUMMARY 292 QUESTIONS 293
PROBLEMS 294 BIBLIOGRAPHY 294 CHAPTER 9 MEASURING AND MANAGING REAL
EXCHANGE RISK 296 9.1 HOW REAL EXCHANGE RATES AFFECT REAL PROFITABILITY
296 THE REAL PROFITABILITY OF AN EXPORTING FIRM 297 9.2 REAL EXCHANGE
RISK AND THE PROFITABILITY OF DOMESTIC AND FOREIGN FIRMS 298 THE REAL
EXCHANGE RATE RISK OF A NET EXPORTER 299 THE REAL EXCHANGE RISK OF A NET
IMPORTER 300 THE REAL EXCHANGE RISK OF AN IMPORT COMPETITOR 302
MEASURING REAL EXCHANGE RISK EXPOSURE 302 9.3 SHARING THE REAL EXCHANGE
RISK: AN EXAMPLE 305 SAFE AIR'S SITUATION 305 METALLWERKE A. G. 'S
PROPOSAL 305 THE CONSULTANT'S TASK 306 BASIC DATA AND ANALYSIS 307
ANALYZING CONTRACTS WHEN INFLATION AND REAL EXCHANGE RATES ARE CHANGING
309 DESIGNING A CONTRACT THAT SHARES THE REAL EXCHANGE RISK 312 WOULD
THE REDESIGNED CONTRACT BE ADOPTED? 314 9.4 PRICING-TO-MARKET STRATEGIES
315 SOME EXAMPLES OF PRICING-TO-MARKET STRATEGIES 315 PRICING-TO-MARKET
BY A MONOPOLIST 316 A MONOPOLISTIC NET IMPORTER 319 EMPIRICAL EVIDENCE
ON PRICING-TO-MARKET 321 9.5 EVALUATING THE PERFORMANCE OF A FOREIGN
SUBSIDIARY 322 THREE TYPES OF SUBSIDIARIES 322 INITIAL OPERATING
PROFITABILITY 323 ACTUAL VERSUS FORECASTED OPERATING RESULTS 323
COMPARING THE OPTIMAL RESPONSE WITH NO RESPONSE BY MANAGERS 325 WHO
DESERVES A BONUS? 326 ASSESSING THE LONG-RUN VIABILITY OF A SUBSIDIARY
327 9.6 STRATEGIES FOR MANAGING REAL EXCHANGE RISK 328 TRANSITORY VERSUS
PERMANENT CHANGES IN REAL EXCHANGE RATES 328 XIV CONTENTS PRODUCTION
MANAGEMENT 329 MARKETING MANAGEMENT 330 9.7 SUMMARY 332 QUESTIONS 332
PROBLEMS 333 BIBLIOGRAPHY 333 CHAPTER 10 EXCHANGE RATE DETERMINATION AND
FORECASTING 335 10.1 PARITY CONDITIONS AND EXCHANGE RATE FORECASTS 335
THE FISHER HYPOTHESIS 336 THE INTERNATIONAL PARITY CONDITIONS 339 REAL
INTEREST RATES AND THE PARITY CONDITIONS 340 10.2 CURRENCY FORECASTING
TECHNIQUES 342 FUNDAMENTAL EXCHANGE RATE FORECASTING 342 T EXCHANGE RATE
FORECASTING WITH TECHNICAL ANALYSIS 343 EVALUATING FORECASTS 343 10.3
FUNDAMENTAL EXCHANGE RATE FORECASTING 346 THE ASSET MARKET APPROACH TO
EXCHANGE RATE DETERMINATION 346 STICKY PRICES AND OVERSHOOTING 348 THE
REAL EXCHANGE RATE AND THE REAL INTEREST RATE DIFFERENTIAL 350 THE REAL
EXCHANGE RATE AND THE CURRENT ACCOUNT 353 THE CAPITAL ACCOUNT AND REAL
EXCHANGE RATES 354 EQUILIBRIUM 354 VARIABLES THAT AFFECT THE REAL
EXCHANGE RATE-CURRENT ACCOUNT EQUILIBRIUM 355 FORECASTING PERFORMANCE OF
FUNDAMENTAL EXCHANGE RATE MODELS 356 10.4 TECHNICAL ANALYSIS 357 "PURE"
TECHNICAL ANALYSIS: CHARTISM 357 FILTER RULES 359 REGRESSION ANALYSIS
362 EVALUATING FORECASTING SERVICES 364 10.5 PREDICTING DEVALUATIONS 366
WHAT CAUSES A CURRENCY CRISIS? 367 EMPIRICAL EVIDENCE ON THE
PREDICTABILITY OF CURRENCY CRISES 368 10.6 SUMMARY 373 QUESTIONS 373
PROBLEMS 374 BIBLIOGRAPHY 375 PART III INTERNATIONAL CAPITAL MARKETS 378
CHAPTER 11 INTERNATIONAL DEBT FINANCING 378 11.1 THE GLOBAL SOURCES OF
FUNDS FOR INTERNATIONAL FIRMS 378 THE FINANCING MIX AROUND THE WORLD 379
11.2 THE CHARACTERISTICS OF DEBT INSTRUMENTS 380 CURRENCY OF
DENOMINATION 380 MATURITY 382 THE NATURE OF INTEREST RATE PAYMENTS:
FIXED-RATE VERSUS FLOATING-RATE DEBT 383 THE INTERNATIONAL CHARACTER OF
DEBT 385 CONTENTS XV 11.3 A TOUR OF THE WORLD'S BOND MARKETS 386 SIZE
AND STRUCTURE OF THE WORLD BOND MARKET 386 THE INTERNATIONAL BOND MARKET
388 THE TYPES OF DEBT INSTRUMENTS IN THE INTERNATIONAL BOND MARKET AND
THEIR PREVALENCE 391 11.4 INTERNATIONAL BANKING 395 BANKS AS MNCS 396
TYPES OF INTERNATIONAL BANKING OFFICES 398 SMALL BELGIAN BANK CARVES OUT
A NICHE 400 INTERNATIONAL BANKING REGULATION 401 11.5 INTERNATIONAL BANK
LOANS 403 EUROCREDITS 403 THE EURONOTE MARKET 407 THE MAJOR DEBT
ARRANGERS 408 11.6 COMPARING THE COSTS OF DEBT 409 * THE ALL-IN-COST
PRINCIPLE 409 MINIMIZING THE COST OF DEBT INTERNATIONALLY 411 11.7
SUMMARY 419 QUESTIONS 420 PROBLEMS 420 BIBLIOGRAPHY 421 CHAPTER 12
INTERNATIONAL EQUITY FINANCING 423 12.1 A TOUR OF INTERNATIONAL STOCK
MARKETS 423 THE SIZE OF STOCK MARKETS 423 THE ORGANIZATION AND OPERATION
OF STOCK MARKETS 426 TURNOVER AND TRANSACTION COSTS 430 EMERGING STOCK
MARKETS 432 12.2 INTERNATIONAL CROSS-LISTING AND DEPOSITARY RECEIPTS 438
AMERICAN DEPOSITARY RECEIPTS 440 GLOBAL DEPOSITARY RECEIPTS 442 12.3 THE
ADVANTAGES AND DISADVANTAGES OF CROSS-LISTING 445 WHY FIRMS CHOOSE TO
CROSS-LIST 445 WHY FIRMS DECIDE AGAINST CROSS-LISTING 449 12.4 STRATEGIC
ALLIANCES 452 12.5 SUMMARY 453 QUESTIONS 454 PROBLEMS 454 BIBLIOGRAPHY
455 CHAPTER 13 INTERNATIONAL CAPITAL MARKET EQUILIBRIUM 457 13.1 RISK
AND RETURN OF INTERNATIONAL INVESTMENTS 457 THE TWO RISKS OF INVESTING
ABROAD 458 THE VOLATILITY OF INTERNATIONAL INVESTMENTS 459 EXPECTED
RETURNS 461 SHARPE RATIOS 462 13.2 THE BENEFITS OF INTERNATIONAL
DIVERSIFICATION 462 RISK REDUCTION THROUGH INTERNATIONAL DIVERSIFICATION
462 THE EFFECT OF INTERNATIONAL DIVERSIFICATION ON SHARPE RATIOS 466 XVI
CONTENTS 13.3 OPTIMAL PORTFOLIO ALLOCATIONS 469 PREFERENCES 469 THE CASE
OF ONE RISKY ASSET 470 THE MEAN STANDARD DEVIATION FRONTIER 473 13.4 THE
CAPITAL ASSET PRICING MODEL 475 ASSUMPTIONS AND ORIGINS 475 A DERIVATION
OF THE CAPM (ADVANCED) 476 INTERPRETING THE CAPM 477 DOMESTIC VERSUS
WORLD CAPMS 479 13.5 THE CAPM IN PRACTICE 481 A RECIPE FOR THE COST OF
EQUITY CAPITAL 482 THE BENCHMARK PROBLEM 482 BETA ESTIMATION 484 THE
RISK PREMIUM ON THE MARKET 485 13.6 INTEGRATED VERSUS SEGMENTED MARKETS
487 * INVESTING IN EMERGING MARKETS 487 THE COST OF CAPITAL IN
INTEGRATED AND SEGMENTED MARKETS 489 SEGMENTATION AND INTEGRATION OVER
TIME 491 HOME BIAS AND ITS IMPLICATIONS 493 13.7 ALTERNATIVE
COST-OF-CAPITAL MODELS 496 THE USEFULNESS OF THE CAPM 496 THE ARBITRAGE
PRICING THEORY 497 THE FAMA-FRENCH FACTOR MODEL 498 13.8 SUMMARY 500-
QUESTIONS 502 PROBLEMS 502 BIBLIOGRAPHY 503 CHAPTER 14 POLITICAL AND
COUNTRY RISK 507 14.1 POLITICAL RISK VERSUS COUNTRY RISK 507 COUNTRY
RISK 507 POLITICAL RISK FACTORS 509 THE DEBT CRISIS 511 14.2
INCORPORATING POLITICAL RISK IN CAPITAL BUDGETING 516 ADJUSTING EXPECTED
CASH FLOWS FOR POLITICAL RISK 517 ADJUSTING THE DISCOUNT RATE INSTEAD OF
CASH FLOWS 520 14.3 COUNTRY AND POLITICAL RISK ANALYSIS 522 COUNTRY RISK
RATINGS 522 THE PRS GROUP'S 1CRG RATING SYSTEM 525 COUNTRY CREDIT
SPREADS 529 COMPUTING POLITICAL RISK PROBABILITIES 541 14.4 MANAGING
POLITICAL RISK 542 STRUCTURING AN INVESTMENT 542 INSURANCE 543 PROJECT
FINANCE 547 14.5 SUMMARY 550 QUESTIONS 551 PROBLEMS 551 BIBLIOGRAPHY 552
CONTENTS XVII PART IV INTERNATIONAL CORPORATE FINANCE 555 CHAPTER 15
INTERNATIONAL CAPITAL BUDGETING 555 15.1 AN OVERVIEW OF ADJUSTED NET
PRESENT VALUE 555 STEP 1: DISCOUNT THE CASH FLOWS OF THE ALL-EQUITY FIRM
556 STEP 2: ADD THE VALUE OF THE FINANCIAL SIDE EFFECTS 556 STEP 3:
VALUE THE GROWTH OPTIONS 557 15.2 DERIVING THE NPV OF FREE CASH FLOW 557
INCREMENTAL PROFITS 558 REVENUES 559 COSTS 559 EARNINGS BEFORE INTEREST
AND TAXES (EBIT) 559 NET OPERATING PROFIT LESS ADJUSTED TAXES (NOPLAT)
559 GROSS CASH FLOW 560 L FREE CASH FLOW 560 DISCOUNTING FREE CASH FLOWS
560 15.3 FINANCIAL SIDE EFFECTS 562 THE COSTS OF ISSUING SECURITIES 562
TAX SHIELDS FOR CERTAIN SECURITIES 562 THE PROPER DISCOUNT RATE 563
COSTS OF FINANCIAL DISTRESS 564 * THE EQUILIBRIUM AMOUNT OF DEBT 564
SUBSIDIZED FINANCING 565 15.4 GROWTH OPTIONS 566 PROBLEMS WITH THE
DISCOUNTED CASH FLOW APPROACH 567 15.5 PARENT VERSUS SUBSIDIARY CASH
FLOWS 568 A THREE-STEP APPROACH TO DETERMINING THE VALUE OF A FOREIGN
SUBSIDIARY 569 15.6 THE CASE OF INTERNATIONAL WOOD PRODUCTS 569
IWPI-SPAIN 'S FREE CASH FLOWS 570 THE PARENT COMPANY'S PERSPECTIVE 576
VALUING THE FINANCIAL SIDE EFFECTS 580 THE FULL ANPV OF IWPI-SPAIN 582
THE CANNIBALIZATION OF EXPORT SALES 583 15.7 SUMMARY 584 QUESTIONS 585
PROBLEMS 586 BIBLIOGRAPHY 587 APPENDIX: DERIVING THE VALUE OF A
PERPETUITY 587 CHAPTER 16 ADDITIONAL TOPICS IN INTERNATIONAL CAPITAL
BUDGETING 589 16.1 ALTERNATIVE APPROACHES TO CAPITAL BUDGETING 590 THE
ANPV APPROACH 590 TWO VALUATION ALTERNATIVES TO ANPV 590 THE WACC
APPROACH TO CAPITAL BUDGETING 590 THE FLOW-TO-EQUITY METHOD OF CAPITAL
BUDGETING 596 THE PROS AND CONS OF ALTERNATIVE CAPITAL BUDGETING METHODS
597 16.2 FORECASTING CASH FLOWS OF FOREIGN PROJECTS 598 THE CHOICE OF
CURRENCY 598 RECONCILING THE TWO METHODS FOR DISCOUNTING FOREIGN CASH
FLOWS 598 XVIII CONTENTS 16.3 CASE STUDY: CMTC'S AUSTRALIAN PROJECT 600
THE AUSTRALIAN INVESTMENT PROPOSAL 600 GATHERING THE ECONOMIC DATA 601
DISCOUNTED CASH FLOWS 603 CASE SOLUTION 603 THE EXPECTED REAL
APPRECIATION OF THE U.S. DOLLAR 610 16.4 TERMINAL VALUE WHEN ROI EQUALS
R WACC 611 TERMINAL VALUE WITH PERPETUAL GROWTH 611 EQUILIBRIUM RATE OF
RETURN ON INVESTMENT 611 16.5 TAX SHIELDS ON FOREIGN CURRENCY BORROWING
614 THE TAX IMPLICATIONS OF BORROWING IN A FOREIGN CURRENCY 614 FOREIGN
CURRENCY BORROWING BY BANANA COMPUTERS 615 16.6 CONFLICTS BETWEEN
BONDHOLDERS AND STOCKHOLDERS 619 THE INCENTIVE TO TAKE RISKS 619 THE
UNDERINVESTMENT PROBLEM 620 OTHER MANAGERIAL PROBLEMS CAUSED BY
FINANCIAL DISTRESS 622 16.7 INTERNATIONAL DIFFERENCES IN ACCOUNTING
STANDARDS 622 16.8 SUMMARY 623 QUESTIONS 623 PROBLEMS 624 BIBLIOGRAPHY
624 CHAPTER 17 RISK MANAGEMENT AND THE FOREIGN CURRENCY HEDGING DECISION
625 17.1 TO HEDGE OR NOT TO HEDGE 625 HEDGING IN AN ENTREPRENEURIAL
VENTURE 626 HEDGING IN A MODERN CORPORATION 626 THE
HEDGING-IS-IRRELEVANT LOGIC OF MODIGLIANI AND MILLER 627 17.2 ARGUMENTS
AGAINST HEDGING 628 HEDGING IS COSTLY 628 HEDGING EQUITY RISK IS
DIFFICULT, IF NOT IMPOSSIBLE 629 HEDGING CAN CREATE BAD INCENTIVES 634
17.3 ARGUMENTS FOR HEDGING 634 HEDGING CAN REDUCE THE FIRM'S EXPECTED
TAXES 634 HEDGING CAN LOWER THE COSTS OF FINANCIAL DISTRESS 639 HEDGING
CAN IMPROVE THE FIRM'S FUTURE INVESTMENT DECISIONS 640 HEDGING CAN
CHANGE THE ASSESSMENT OF A FIRM'S MANAGERS 640 17.4 MERCK'S HEDGING
RATIONALE 642 DEVELOPING NATURAL OPERATING HEDGES 643 MERCK'S FIVE-STEP
PROCEDURE 643 17.5 HEDGING TRENDS 645 INFORMATION FROM SURVEYS 645
EMPIRICAL ANALYSIS OF WHY FIRMS HEDGE 646 TO HEDGE OR NOT TO HEDGE:
UNDERSTANDING YOUR COMPETITORS 646 17.6 SUMMARY 647 QUESTIONS 647
PROBLEMS 648 BIBLIOGRAPHY 649 CONTENTS XIX PARTV MANAGING ONGOING
OPERATIONS 650 CHAPTER 18 FINANCING INTERNATIONAL TRADE 650 18.1 THE
FUNDAMENTAL PROBLEM WITH INTERNATIONAL TRADE 650 18.2 INTERNATIONAL
TRADE DOCUMENTS 652 BILLS OF LADING 653 COMMERCIAL INVOICES 654 PACKING
LISTS 654 INSURANCE 654 CONSULAR INVOICE 655 CERTIFICATE OF ANALYSIS 655
18.3 METHODS OF PAYMENT 655 CASH IN ADVANCE 655 DOCUMENTARY CREDITS 656
DOCUMENTARY COLLECTIONS 661 & SALES ON OPEN ACCOUNT 662 INTERNATIONAL
FINANCING ON THE INTERNET 663 18.4 FINANCING EXPORTS 663 BANK LINE OF
CREDIT 663 BANKER'S ACCEPTANCES 664 BUYER CREDIT 665 SELLING ACCOUNTS
RECEIVABLE 665 LIMITED-RECOURSE FINANCING: FORFAITING 665 EXPORT
FACTORING 666 GOVERNMENT SOURCES OF EXPORT FINANCING AND CREDIT
INSURANCE 668 18.5 COUNTERTRADE 670 TRANSACTIONS WITHOUT MONEY 671
COUNTERTRADE INVOLVING MONEY OR CREDIT 672 18.6 SUMMARY 673 QUESTIONS
674 BIBLIOGRAPHY 675 CHAPTER 19 MANAGING NET WORKING CAPITAL 676 19.1
THE PURPOSE OF NET WORKING CAPITAL 676 INVENTORIES AS ASSETS 677 OTHER
CURRENT ASSETS 677 SHORT-TERM LIABILITIES 677 19.2 INTERNATIONAL CASH
MANAGEMENT 678 CONSTRAINTS ON INTERNATIONAL CASH MANAGEMENT 678 CASH
MANAGEMENT WITH A CENTRALIZED POOL 678 19.3 CASH TRANSFERS FROM
AFFILIATES TO PARENTS 685 INTERNATIONAL DIVIDEND CASH FLOWS 685
INTERNATIONAL ROYALTY AND MANAGEMENT-FEE CASH FLOWS 686 TRANSFER PRICING
AND CASH FLOWS 687 STRATEGIES FOR DEALING WITH BLOCKED FUNDS 693 19.4
MANAGING ACCOUNTS RECEIVABLE 695 CURRENCY OF DENOMINATION 695 LEADING
AND LAGGING PAYMENTS 698 CREDIT TERMS 700 19.5 INVENTORY MANAGEMENT 700
OPTIMAL INVENTORY THEORY 700 XX CONTENTS 19.6 SUMMARY 703 QUESTIONS 704
PROBLEMS 705 BIBLIOGRAPHY 706 PART VI FOREIGN CURRENCY DERIVATIVES 707
CHAPTER 20 FOREIGN CURRENCY FUTURES AND OPTIONS 707 20.1 THE BASICS OF
FUTURES CONTRACTS 707 FUTURES VERSUS FORWARDS 707 THE PRICING OF FUTURES
CONTRACTS 711 20.2 HEDGING TRANSACTION RISK WITH FUTURES 714 HEDGING AT
NANCY FOODS 714 POTENTIAL PROBLEMS WITH A FUTURES HEDGE 716 * 20.3
BASICS OF FOREIGN CURRENCY OPTION CONTRACTS 719 BASIC OPTION TERMINOLOGY
719 OPTIONS TRADING 722 20.4 THE USE OF OPTIONS IN RISK MANAGEMENT 725 A
BIDDING SITUATION AT BAGWELL CONSTRUCTION 725 USING OPTIONS TO HEDGE
TRANSACTION RISK 726 HEDGING WITH OPTIONS AS BUYING INSURANCE 731
SPECULATING WITH OPTIONS 735 OPTIONS VALUATION 738 20.5 COMBINATIONS OF
OPTIONS AND EXOTIC OPTIONS 743 RANGE FORWARDS AND CYLINDER OPTIONS 744
OTHER EXOTIC OPTIONS 746 20.6 SUMMARY 747 QUESTIONS 748 PROBLEMS 749
BIBLIOGRAPHY 750 CHAPTER 21 INTEREST RATE AND FOREIGN CURRENCY SWAPS 751
21.1 INTRODUCTION TO SWAPS 751 CURRENCY SWAPS VERSUS INTEREST RATE SWAPS
752 THE SIZE OF THE SWAP MARKETS 753 21.2 INTEREST RATE SWAPS 754
INTEREST RATE RISK 755 THE NATURE OF INTEREST RATE SWAP CONTRACTS 756
THE PROFITABILITY OF INTEREST RATE SWAPS 757 DEALING WITH CREDIT RISKS:
REQUIRING COLLATERAL AND MARKING TO MARKET 758 21.3 FOREIGN CURRENCY
SWAPS 758 THE MECHANICS OF MODERN CURRENCY SWAPS 760 COMPARATIVE
BORROWING ADVANTAGES IN MATCHED CURRENCY SWAPS 762 SWAPPING BOND
PROCEEDS AND COUPON RATES WITH QUOTED SWAP RATES 768 CURRENCY SWAPS AS A
PACKAGE OF FORWARD CONTRACTS 772 THE VALUE OF A CURRENCY SWAP 773 THE
RATIONALE FOR CURRENCY SWAPS 774 21.4 PARALLEL LOANS AND BACK-TO-BACK
LOANS 775 PARALLEL LOANS 776 BACK-TO-BACK LOANS 778 CONTENTS XXI 21.5
SUMMARY 779 QUESTIONS 779 PROBLEMS 780 BIBLIOGRAPHY 781 GLOSSARY 783
INDEX 797 XXII CONTENTS |
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| author | Bekaert, Geert 1964- Hodrick, Robert J. 1950- |
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| author_role | aut aut |
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| dewey-full | 658.15/99 |
| dewey-hundreds | 600 - Technology (Applied sciences) |
| dewey-ones | 658 - General management |
| dewey-raw | 658.15/99 |
| dewey-search | 658.15/99 |
| dewey-sort | 3658.15 299 |
| dewey-tens | 650 - Management and auxiliary services |
| discipline | Wirtschaftswissenschaften |
| discipline_str_mv | Wirtschaftswissenschaften |
| edition | Internat. ed. |
| format | Book |
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| genre_facet | Lehrbuch |
| id | DE-604.BV023343470 |
| illustrated | Illustrated |
| index_date | 2024-07-02T21:02:29Z |
| indexdate | 2025-02-20T06:38:20Z |
| institution | BVB |
| isbn | 0136054900 9780136054900 |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-016527199 |
| oclc_num | 261924453 |
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| owner | DE-Aug4 DE-703 DE-526 DE-1047 DE-29 DE-863 DE-BY-FWS DE-473 DE-BY-UBG DE-M49 DE-BY-TUM |
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| physical | XXVII, 810 S. graph. Darst. |
| publishDate | 2009 |
| publishDateSearch | 2009 |
| publishDateSort | 2009 |
| publisher | Pearson Prentice Hall |
| record_format | marc |
| series2 | The Prentice Hall series in finance |
| spellingShingle | Bekaert, Geert 1964- Hodrick, Robert J. 1950- International financial management Multinationales Unternehmen Foreign exchange International business enterprises Finance International finance Multinationales Unternehmen (DE-588)4075092-9 gnd Finanzmanagement (DE-588)4139075-1 gnd |
| subject_GND | (DE-588)4075092-9 (DE-588)4139075-1 (DE-588)4123623-3 |
| title | International financial management |
| title_auth | International financial management |
| title_exact_search | International financial management |
| title_exact_search_txtP | International financial management |
| title_full | International financial management Geert Bekaert ; Robert J. Hodrick |
| title_fullStr | International financial management Geert Bekaert ; Robert J. Hodrick |
| title_full_unstemmed | International financial management Geert Bekaert ; Robert J. Hodrick |
| title_short | International financial management |
| title_sort | international financial management |
| topic | Multinationales Unternehmen Foreign exchange International business enterprises Finance International finance Multinationales Unternehmen (DE-588)4075092-9 gnd Finanzmanagement (DE-588)4139075-1 gnd |
| topic_facet | Multinationales Unternehmen Foreign exchange International business enterprises Finance International finance Finanzmanagement Lehrbuch |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=016527199&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
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Indexes
THWS Würzburg Zentralbibliothek Lesesaal
| Call Number: |
1000 QK 640 B424 |
|---|---|
| Copy 1 | ausleihbar Available Place a Hold |
| Copy 2 | ausleihbar Available Place a Hold |