International Business Chapter 9 - international financial markets - terms

Capital market -- system that allocates financial resources in the form of debt and equity according to their most efficient uses
debt -- loans in which the borrower promises to repay the borrowed amount (the principal), plus a predetermined rate of interest
Bond -- debt instrument that specifies the timing of principal and interest payments.
Equity -- part ownership of a company in which the equity holder participates with other partners in the company's financial gains and losses.
stock -- shares of ownership in the company's assets that give shareholders a claim on the company's future cash flows.
Liquidity -- ease with which bondholders and shareholders may convert their investments into cash.
International capital market -- network of individuals, companies, financial institutions, and governments that invest in borough across national boundaries
securitization -- unbundling and repackaging of hard to trade financial assets into more liquid, negotiable, and marketable financial instruments (or securities).
Offshore financial center -- country or territory, whose financial sector features very few regulations and few, if any, taxes.
International bond market -- market consisting of all bonds sold by issuing companies, governments, or other organizations outside their own countries.
Eurobond -- bond issued outside the country and whose currency it is denominated the line. Foreign bond -- bond sold outside the borrower's country in denominated in the current state of the country in which it is sold.
International equity market -- market consisting of all stocks bought and sold outside the issuers country.
Eurocurrency market -- market consisting of all the world's currencies that the current referred to as Eurocurrency) that are banked outside their countries of origin
Interbank interest rates -- interest rates that the world's largest banks charge one another for loans.
Foreign exchange market -- market in which currencies are bought and sold in their price is determined.
Exchange rate -- rate at which one currency is exchanged for another.
Currency hedging -- practice of insuring against potential losses that result from adverse changes in exchange rates.
Currency arbitrage -- instantaneous purchase and sale of the currency in different markets for profit.
Interest arbitrage -- profit motivated purchase and sale of interest paying securities denominated in different currencies.
Currency speculation -- purchase or sale of a currency with the expectation that its value will change and generate a profit
quoted currency -- and a quoted exchange rate, the currency with which another currency is to be purchased
base currency -- in a quoted exchange rate, the currency that is to be purchased with another currency
exchange rate risk (foreign exchange risk) -- risk of adverse changes in exchange-rate
cross rate -- exchange rate calculated using two other exchange rates
spot rate -- exchange-rate requiring delivery of the traded currency within two business days.
Spot market -- market for currency transactions at spot rates
foreword rate -- exchange-rate at which two parties agree to exchange currencies on a specified future date.
Forward market -- market for currency transactions at forward rates.
Forward contract -- contract that requires the exchange of an agreed upon amount of a currency on an agreed-upon date at a specific exchange-rate.
Derivative -- financial instrument whose value derives from other commodities or financial instruments.
Currency swap -- simultaneous purchase and sale of foreign exchange for two different dates.
Currency option -- right, or option, to exchange a specific amount of a currency on a specific date at a specific rate.
Currency futures contract -- contract requiring the exchange of a specific amount of currency on a specific date at a specific exchange-rate, with all conditions fixed and not adjustable.
Vehicle currency -- currency used as an intermediary to convert funds between two other currencies.
Interbank market -- market in which the world's largest banks exchange currencies at spot and forward rates.
Clearing -- process of aggregating the currencies that one bank owes another and then carrying out the transaction.
Security exchange -- exchange specializing in currency futures and options transactions.
Over-the-counter (OTC) market -- exchange consisting of a global computer network of foreign exchange traders and other market participants.
Convertible (hard) currency -- currency that trades freely in the foreign-exchange market, with its price determined by the forces of supply and demand.
Countertrade -- practice of selling goods or services that are paid for, in whole or part, with other goods and services