《财务管理专业英语》教学课件12.ppt

12.1 Introduction 12.2 Foreign Exchange Market 12.3 Exchange Rate Parity 12.4 Multinational Capital Budgeting 12.5 International Financial Decision 12.6 Working Capital Management 12.7 Hedging Currency Risk INTRODUCTION Free trade Trend General Agreement on Tariffs and Trade (GATT) World Trade Organization (WTO) International Monetary Fund (IMF) European Union(EU), European Free Trade Association (EFTA), European Economic Area North American Free Trade Agreement INTRODUCTION Multinational Corporations To gain access to new markets To achieve production efficiency To gain access to resources To reduce political and regulatory hurdles To diversify To gain access to technology FOREIGN EXCHANGE MARKET Society for Worldwide Inter-bank Financial Telecommunications (SWIFT) FOREIGN EXCHANGE MARKET Exchange Rates Quotation direct quotation indirect quotation Exchange rate system floating exchange rate system fixed exchange rate system managed floating exchange rate system FOREIGN EXCHANGE MARKET Currency Risk Currency risk, also called exchange-rate risk, is the risk that the relative values of the domestic and foreign currencies will adversely change in the future, changing the value of the future cash flows. FOREIGN EXCHANGE MARKET Types of Transactions Spot trades Forward trades Swap EXCHANGE RATE PARITY Interest Rate Parity—— the general relationship between spot and forward exchange rates Purchasing Power Parity ——law of one price, implies that the level of exchange rates adjusts so as to cause identical goods to cost the same amount in different countries. EXCHANGE RATE PARITY Unbiased Forward Rates —— If market participants are risk neutral and there are no transaction costs, the market will set the forward rate equal to the spot rate which is expected to be observed on the maturity date of the forward contract. Inflation, Interest Rates, and Exchange Rates ——inflation has a dominant influence on relative i