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"International Finance" presents the corporate uses of international financial markets to upper undergraduate and graduate students of business finance and financial economics. Combining practical knowledge, up-to-date theories, and real-world applications, this textbook explores issues of valuation, funding, and risk management. "International Finance" shows how theoretical applications can be brought into managerial practice.
The text includes an extensive introduction followed by three main sections: currency markets; exchange risk, exposure, and risk management; and long-term international funding and direct investment. Each section begins with a short case study, and each of the sections' chapters concludes with a CFO summary, examining how a hypothetical chief financial officer might apply topics to a managerial setting. The book also contains end-of-chapter questions to help students grasp the material presented.
Focusing on international markets and multinational corporate finance, "International Finance" is the go-to resource for students seeking a complete understanding of the field.Rigorous focus on international financial markets and corporate finance concepts An up-to-date and practice-oriented approach Strong real-world examples and applications Comprehensive look at valuation, funding, and risk management Introductory case studies and "CFO summaries," and end-of-chapter quiz questions Solutions to the quiz questions are available online
[This] is the most comprehensive textbook on the financing, transactional, and risk management side of international trade and investment currently available... Compared to many other textbooks, this one excels at focusing on the topic at hand and not merely providing a corporate or derivative textbook with some international flavor added. The book provides more than ample material for courses on financial markets and business finance. -- Evert Wipplinger Financial Markets and Portfolio Management
| Preface | p. xi |
| Acknowledgments | p. xiv |
| Introduction and Motivation for International Finance | p. 1 |
| Why Does the Existence of Borders Matter for Finance? | p. 3 |
| Key Issues in International Business Finance | p. 4 |
| What Is on the International CFO's Desk? | p. 11 |
| Overview of this Book | p. 13 |
| International Finance: Institutional Background | p. 16 |
| Money and Banking: A Brief Review | p. 16 |
| The International Payment Mechanism | p. 28 |
| International ("Euro") Money and Bond Markets | p. 33 |
| What Is the Balance of Payments? | p. 35 |
| Exchange-Rate Regimes | p. 45 |
| Test Your Understanding | p. 58 |
| Currency Markets | p. 63 |
| About This Part | p. 65 |
| Spot Markets for Foreign Currency | p. 69 |
| Exchange Rates | p. 69 |
| Major Markets for Foreign Exchange | p. 78 |
| The Law of One Price for Spot Exchange Quotes | p. 87 |
| Translating FC Figures: Nominal Rates, PPP Rates, and Deviations from PPP | p. 97 |
| CFO's Summary | p. 108 |
| Technical Notes | p. 110 |
| Test Your Understanding | p. 110 |
| Understanding Forward Exchange Rates for Currency | p. 115 |
| Introduction to Forward Contracts | p. 115 |
| The Relation between Exchange and Money Markets | p. 119 |
| The Law of One Price and Covered Interest Parity | p. 123 |
| The Market Value of an Outstanding Forward Contract | p. 130 |
| CFO's Summary | p. 140 |
| Appendix: Interest Rates, Returns, and Bond Yields | p. 141 |
| Appendix: The Forward Forward and the Forward Rate Agreement | p. 145 |
| Test Your Understanding | p. 154 |
| Using Forwards for International Financial Management | p. 157 |
| Practical Aspects of Forwards in Real-World Markets | p. 157 |
| Using Forward Contracts (1): Arbitrage | p. 161 |
| Using Forward Contracts (2): Hedging Contractual Exposure | p. 164 |
| Using Forward Contracts (3): Speculation | p. 172 |
| Using Forward Contracts (4): Minimizing the Impact of Market Imperfections | p. 177 |
| Using the Forward Rate in Commercial, Financial, and Accounting Decisions | p. 190 |
| CFO's Summary | p. 194 |
| Test Your Understanding | p. 198 |
| The Market for Currency Futures | p. 202 |
| Handling Default Risk in Forward Markets: Old and New Tricks | p. 202 |
| How Futures Contracts Differ from Forward Markets | p. 207 |
| Effect of Marking to Market on Futures Prices | p. 215 |
| Hedging with Futures Contracts | p. 218 |
| The CFO's Conclusion: Pros and Cons of Futures Contracts Relative to Forward Contracts | p. 226 |
| Appendix: Eurocurrency Futures Contracts | p. 227 |
| Technical Notes | p. 232 |
| Test Your Understanding | p. 234 |
| Markets for Currency Swaps | p. 239 |
| How the Modern Swap Came About | p. 240 |
| The Fixed-for-Fixed Currency Swaps | p. 244 |
| Interest-Rate Swaps | p. 252 |
| Cross-Currency Swaps | p. 256 |
| CFO's Summary | p. 258 |
| Technical Notes | p. 259 |
| Test Your Understanding | p. 259 |
| Currency Options (1): Concepts and Uses | p. 262 |
| An Introduction to Currency Options | p. 262 |
| Institutional Aspects of Options Markets | p. 269 |
| An Aside: Futures-Style Options on Futures | p. 272 |
| Using Options (1): Arbitrage | p. 275 |
| Using Options (2): Hedging | p. 281 |
| Using Options (3): Speculation | p. 288 |
| CFO's Summary | p. 291 |
| Test Your Understanding | p. 294 |
| Currency Options (2): Hedging and Valuation | p. 299 |
| The Logic of Binomial Option Pricing: One-Period Problems | p. 300 |
| Notation and Assumptions for the Multiperiod Binomial Model | p. 306 |
| Stepwise Multiperiod Binomial Option Pricing | p. 312 |
| Toward Black-Merton-Scholes (European Options) | p. 319 |
| CFO's Summary | p. 323 |
| Technical Notes | p. 325 |
| Test Your Understanding | p. 331 |
| Exchange Risk, Exposure, and Risk Management | p. 337 |
| About This Part | p. 339 |
| Do We Know What Makes Forex Markets Tick? | p. 342 |
| The Behavior of Spot Exchange Rates | p. 344 |
| The PPP Theory and the Behavior of the Real Exchange Rate | p. 358 |
| Exchange Rates and Economic Policy Fundamentals | p. 373 |
| Conclusion | p. 384 |
| Technical Notes | p. 385 |
| Do Forex Markets Themselves See What Is Coming? | p. 398 |
| The Forward Rate as a Black-Box Predictor | p. 398 |
| Forecasts by Specialists | p. 418 |
| CFO's Summary | p. 423 |
| Test Your Understanding | p. 428 |
| (When) Should a Firm Hedge Its Exchange Risk? | p. 434 |
| The Effect of Corporate Hedging May Not Just Be "Additive" | p. 435 |
| FAQs about Hedging | p. 443 |
| CFO's Summary | p. 448 |
| Test Your Understanding | p. 449 |
| Measuring Exposure to Exchange Rates | p. 454 |
| The Concepts of Risk and Exposure: A Brief Survey | p. 455 |
| Contractual-Exposure Hedging and Its Limits | p. 457 |
| Measuring and Hedging of Operating Exposure | p. 461 |
| Accounting Exposure | p. 474 |
| Test Your Understanding | p. 487 |
| Value-at-Risk: Quantifying Overall Net Market Risks | p. 493 |
| Risk Budgeting: A Factor-Based, Linear Approach | p. 494 |
| The Linear/Normal VaR Model: Potential Flaws and Corrections | p. 502 |
| Historical Backtesting, Bootstrapping, Monte Carlo, and Stress Testing | p. 515 |
| CFO's Summary | p. 520 |
| Epilogue: The Credit Crunch Blues | p. 524 |
| Test Your Understanding | p. 528 |
| Managing Credit Risk in International Trade | p. 530 |
| Payment Modes without Bank Participation | p. 531 |
| Documentary Payment Modes with Bank Participation | p. 536 |
| Other Standard Ways of Coping with Default Risk | p. 542 |
| CFO's Summary | p. 545 |
| Test Your Understanding | p. 546 |
| Long-Term International Funding and Direct Investment | p. 551 |
| About This Part | p. 553 |
| International Fixed-Income Markets | p. 558 |
| "Euro" Deposits and Loans | p. 559 |
| International Bond and Commercial-Paper Markets | p. 572 |
| How to Weigh Your Borrowing Alternatives | p. 581 |
| CFO's Summary | p. 590 |
| Test Your Understanding | p. 592 |
| Segmentation and Integration in the World's Stock Exchanges | p. 595 |
| Background Information on International Stock Markets | p. 599 |
| Why Don't Exchanges Simply Merge? | p. 618 |
| Can Unification Be Achieved by a Winner Taking All? | p. 625 |
| CFO's Summary | p. 638 |
| Test Your Understanding | p. 639 |
| Why-or When-Should We Cross List Our Shares? | p. 641 |
| Why Might Companies Want to List Shares Abroad? | p. 642 |
| Shareholders' Likely Reaction to Diversification Opportunities | p. 646 |
| Sifting through the Empirics on Cross-Listing Effects | p. 651 |
| CFO's Summary | p. 660 |
| Test Your Understanding | p. 662 |
| Setting the Cost of International Capital | p. 663 |
| The Link between Capital-Market Segmentation and the Sequencing of Discounting and Translation | p. 666 |
| The Single-Country CAPM | p. 669 |
| The International CAPM | p. 680 |
| The CFO's Summary re Capital Budgeting | p. 690 |
| Technical Notes | p. 693 |
| Test Your Understanding | p. 696 |
| International Taxation of Foreign Investments | p. 703 |
| Forms of Foreign Activity | p. 703 |
| Multiple Taxation versus Tax Neutrality | p. 709 |
| International Taxation of a Branch (1): The Credit System | p. 712 |
| International Taxation of a Branch (2): The Exclusion System | p. 718 |
| Remittances from a Subsidiary: An Overview | p. 721 |
| International Taxation of a Subsidiary (1): The Credit System | p. 724 |
| International Taxation of a Subsidiary (2): The Exclusion System | p. 730 |
| CFO's Summary | p. 732 |
| Test Your Understanding | p. 733 |
| Putting It All Together: International Capital Budgeting | p. 739 |
| Domestic Capital Budgeting: A Quick Review | p. 739 |
| InNPV Issue #1: How to Deal with the Implications of Nonequity Financing | p. 751 |
| InNPV Issue #2: How to Deal with Exchange Rates | p. 758 |
| InNPV Issue #3: How to Deal with Political Risks | p. 760 |
| Issue #4: Make Sure to Include All Incremental Cash Flows | p. 765 |
| Other Things to Do in Spreadsheets While You're There | p. 766 |
| CFO's Summary | p. 768 |
| Technical Notes | p. 770 |
| Test Your Understanding | p. 773 |
| Negotiating a Joint-Venture Contract: The NPV Perspective | p. 777 |
| The Three-Step Approach to Joint-Venture Capital Budgeting | p. 779 |
| A Framework for Profit Sharing | p. 781 |
| Case I: A Simple Pro-Rata Joint Branch with Neutral Taxes and Integrated Capital Markets | p. 782 |
| Case II: Valuing a Pro-Rata Joint Branch when Taxes Differ | p. 784 |
| Case III: An Unbundled Joint Venture with a License Contract or a Management Contract | p. 786 |
| CFO's Summary and Extensions | p. 793 |
| Test Your Understanding | p. 797 |
| Further Reading | p. 801 |
| References | p. 803 |
| Index | p. 813 |
| Table of Contents provided by Ingram. All Rights Reserved. |
ISBN: 9780691136677
ISBN-10: 069113667X
Audience:
Professional
Format:
Hardcover
Language:
English
Number Of Pages: 864
Published: 1st March 2009
Dimensions (cm): 25.7 x 18.7
x 4.277
Weight (kg): 1.606
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