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Foreign Exchange And Money Market : Managing Foreign and Domestic Currency Operations - Heinz Riehl

Foreign Exchange And Money Market

Managing Foreign and Domestic Currency Operations

Hardcover Published: 19th October 1985
ISBN: 9780070526716
Number Of Pages: 476

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The authors provide an intimate knowledge of the fundamentals required to cope with the everchanging nature of the money and foreign exchange markets. Its emphasis is on the management of down to earth operations, covering how to read and take advantage of market quotations, the funds manager and the interaction between money and foreign exchange markets, funds management in a two-way market, problems and solutions in the trading room of a bank, problems and solutions of the multinational non-financial business, returns and risks, in foreign exchange operations, and control of foreign exchange and money market operations. This new edition is updated to account for recent changes and expanded to emphasize and broaden the treatment of money markets.

Prefacep. xv
Foreign Exchange and Money Marketsp. 1
Who's Who in the Marketsp. 3
Money marketp. 4
What the money market isp. 4
Actors in the money marketp. 4
Foreign money marketp. 8
Why a Eurodollar market?p. 9
Actors in the foreign money marketp. 11
Foreign exchange marketp. 11
What the foreign exchange market isp. 11
Actors in the foreign exchange marketp. 13
Interest Rates and Foreign Exchange Ratesp. 19
Rates in the money marketp. 19
Rates in the foreign money marketp. 22
Spread between rates on domestic and Eurocurrency depositsp. 23
Revolving Euroterm loansp. 25
Rates in the foreign exchange marketp. 30
Meaning of exchange quotationsp. 30
Reciprocal ratesp. 31
Cross ratesp. 34
The chainp. 35
Price and volume quotationsp. 36
Problemsp. 38
Interactions between the Marketsp. 51
The nature of cash flowsp. 51
Value datesp. 54
Eligible value datesp. 55
Spot value datesp. 57
Forward value datesp. 57
Interactions between the money and foreign exchange marketsp. 59
Operating in the money marketp. 61
Operating in the foreign exchange marketp. 61
Money market or foreign exchange marketp. 66
Problemsp. 73
Two-Way Markets: Bid and Offer Ratesp. 82
Rates in the money marketp. 83
Rates in the foreign exchange marketp. 84
Meaning of exchange quotationsp. 84
Reciprocal ratesp. 86
Cross ratesp. 87
Some comments on quotationsp. 92
How can you evaluate the quality of a quotation?p. 92
Information content of quotationsp. 93
Problemsp. 95
Funds Management in a Two-Way Marketp. 101
Swap ratesp. 101
What are swap rates?p. 101
Bid and offer in the swap ratep. 103
Swap transactionsp. 104
Swap transactions with matched cash flows: Covered interest arbitragep. 107
Swap transactions with mismatched cash flowsp. 109
Problemsp. 119
Factors Affecting Spot Exchange Ratesp. 122
The economics of international transactionsp. 123
Trade in merchandisep. 123
Trade in servicesp. 126
Unilateral transfersp. 126
Capital accountp. 126
Official reservesp. 128
Structure of the balance of paymentsp. 129
The determinants of exchange ratesp. 131
The balance of payments approachp. 131
Purchasing power parityp. 132
Market expectationsp. 133
International monetary systemp. 136
Factors Affecting Interest Ratesp. 140
The level of interest ratesp. 140
Supply and demand for fundsp. 141
Changes in the money supplyp. 141
The shape of the yield curvep. 143
Market expectationsp. 144
Other factorsp. 146
Creditworthiness and market liquidityp. 148
Problems and Opportunities in the Treasury Departmentp. 153
Operations in the Trading Roomp. 155
Basic operations in the marketp. 155
Taking advantage of disequilibrium situations: Covered interest arbitragep. 155
Taking advantage of expected changes in interest ratesp. 160
Rolling over a net exchange positionp. 165
Catering to customers' needs in the forward marketp. 169
Getting out of an exchange positionp. 169
Creating a forward exchange marketp. 174
Computing the effective yield or cost of fundsp. 182
The value of floatp. 182
All-in cost of exchange transactionsp. 183
Cost of foreign currency depositsp. 184
Central banks' interventions in foreign exchange marketsp. 186
How not to do itp. 187
Intervention to achieve domestic objectivesp. 189
Intervention to support the spot ratep. 190
Problemsp. 194
Funds Management in the Exchange Marketp. 213
Borrowing and investing without an exchange positionp. 214
Raising needed funds in a given currencyp. 214
Investing available funds in a given currencyp. 214
Another examplep. 216
Borrowing and investing with an exchange positionp. 219
Managing opposite cash flows in different currenciesp. 229
Cash flows take place immediatelyp. 229
Cash flows will take place in the futurep. 231
Funds management under exchange controlsp. 236
Investing local funds under capital inflow controlsp. 236
Borrowing foreign funds under capital outflow controlsp. 238
Currency diversification and liquidity in a portfoliop. 244
Problemsp. 246
Funds Management in the Money Marketp. 259
Money market instruments in the United Statesp. 260
U.S. Treasury bills and other government securitiesp. 260
Federal fundsp. 261
Certificates of depositp. 264
Commercial paperp. 268
Repurchase agreementsp. 268
Bankers' acceptancesp. 270
Futures market for money market instrumentsp. 272
Money market fundsp. 274
Comparing rates in the money marketp. 275
Comparing market ratesp. 275
Comparing lending ratesp. 279
Typical money market operationsp. 282
Liquidating an instrument before maturityp. 282
Tail-end gapping (riding the yield curve)p. 283
Spread trading (arbitrage)p. 285
Taking advantage of anticipated changes in interest rate levelsp. 288
Hedging interest rate positionsp. 290
Cash-flow management and the relationships among financial marketsp. 292
Problemsp. 294
Financing Commercial Transactionsp. 297
Hedging the net exchange position created by tradep. 299
Financing trade after sale is realizedp. 304
Finacing trade when order is receivedp. 308
Hedging alternatives in controlled exchange marketsp. 313
Cross-currency hedgingp. 314
A mutual indemnification agreementp. 315
Problemsp. 320
Managing Exposure to Exchange Riskp. 327
Exposure: Cash flows versus accounting conventionsp. 327
Hedging cash-flow exposuresp. 332
Hedging in the forward marketp. 334
Hedging in the money marketp. 334
Hedging balance-sheet exposuresp. 339
Hedging in the financial marketsp. 339
Modifying the balance sheetp. 342
Problemsp. 346
Controlling Treasury Operationsp. 351
Accounting for Treasury Operationsp. 353
Accounting for money market operationsp. 353
Recording money market transactionsp. 353
Measuring profits in money market operationsp. 356
Bookkeeping for money market operationsp. 361
Accounting for foreign exchange operationsp. 364
Recording foreign exchange transactionsp. 364
Measuring profits in foreign exchange operationsp. 366
Bookkeeping for foreign exchange operationsp. 373
Accounting for joint exchange and money market transactionsp. 374
Covered interest arbitragep. 375
Creating a forward exchange marketp. 378
Exchange transactions with all-in price quotesp. 379
Loan financing through swapsp. 381
Risks in Treasury Operationsp. 386
Credit riskp. 386
Credit risk in the money marketp. 387
Credit risk in the foreign exchange marketp. 387
Sovereign riskp. 389
Rate riskp. 389
Rate risk in the money marketp. 389
Rate risk in the foreign exchange marketp. 390
Liquidity riskp. 391
Liquidity risk in the money marketp. 391
Liquidity risk in the foreign exchange marketp. 392
Evaluation of comparative risksp. 393
Comparative credit risksp. 396
Comparative rate risksp. 397
Comparative liquidity risksp. 397
Overall assessmentp. 398
Problemsp. 398
Control of Treasury Operationsp. 401
Credit riskp. 401
Credit risk in the money marketp. 401
Credit risk in the foreign exchange marketp. 402
Sovereign risk or cross-border riskp. 404
Rate riskp. 405
Changes in interest ratesp. 405
Changes in exchange ratesp. 405
Liquidity riskp. 406
The cash-flow reportp. 407
The liability-mix reportp. 414
Miscellaneous controlsp. 417
Aggregate limitsp. 417
Confirmationsp. 418
Protection against fraudp. 418
Appendixp. 420
Bibliographyp. 421
Glossaryp. 425
Indexp. 447
Table of Contents provided by Syndetics. All Rights Reserved.

ISBN: 9780070526716
ISBN-10: 0070526710
Audience: Tertiary; University or College
Format: Hardcover
Language: English
Number Of Pages: 476
Published: 19th October 1985
Publisher: McGraw-Hill Education - Europe
Country of Publication: GB
Dimensions (cm): 22.9 x 15.2  x 3.0
Weight (kg): 0.87
Edition Number: 2
Edition Type: Revised