EC223 Lecture Notes - Lecture 4: Adverse Selection, Life Insurance, Eurodollar
Document Summary
Sold in foreign counter, denominated in that country"s currency. For example, canadian company selling bond in the uk denominated in pounds. Sold in foreign country, denominated in another currency. For example, canadian company selling bond in uk denominated in cad. Widely used: over 80% of new issues are eurobonds. Foreign currencies deposited in banks outside home country. Eurodollars: u. s. dollars deposited in foreign banks outside the us or in foreign branches of us banks. Primary route to move funds from lenders to borrowers. Improves risk sharing a. b. c. a. b. Potential borrowers who are more likely to default are the ones i. Potential borrowers who are more likely to default are the ones who most actively seek out loans b. Borrowers might engage in activities that are undesirable from a lender"s point of view c. Chartered banks, trusts and mortgage loan companies, credit unions and caisses populaires.
