EECS 1541 Lecture 18: EECS 1541 Lecture 18 Notes
23 Jun 2018
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EECS 1541 Lecture 18 Notes
Introduction
International money market
The Coca-Cola Co. has replaced 30 to 40 percent of its forward contracting with currency
options.
Although most MNCs use forward contracts, many also use currency options.
Additional details about currency options, including other differences from futures and
forward contracts
In most countries, local corporations must often borrow short-term funds to support
their operations.
Country governments may also need to borrow short-term funds in order to finance
their budget deficits.
A money market facilitates the process by which surplus units (individuals or institutions
with available short-term funds) can transfer funds to deficit units (institutions or
individuals in need of funds).
Financial institutions such as commercial banks accept short-term deposits and redirect
the funds toward deficit units.
In addition, corporations and governments may issue short-term securities that are
purchased by local investors.
The growth in international business has led to the corporations and governments of a
given country needing short-term funds denominated in a currency other than their
own, home currency.
First, they may need to borrow funds to pay for imports denominated in a foreign
currency.
Second, even if funds are needed to support local operations, they may consider
borrowing in a nonlocal currency featuring lower interest rates.
This strategy is especially appropriate for firms expecting future receivables
denominated in that currency.
Document Summary
The coca-cola co. has replaced 30 to 40 percent of its forward contracting with currency options. Although most mncs use forward contracts, many also use currency options. Second, even if funds are needed to support local operations, they may consider borrowing in a nonlocal currency featuring lower interest rates. This strategy is especially appropriate for firms expecting future receivables denominated in that currency. Most mncs use forward contracts, many also use currency options. Additional details about currency options, including other differences from futures and forward contracts. In most countries, local corporations must often borrow short-term funds to support their operations. Country governments may also need to borrow short-term funds in order to finance their budget deficits. A money market facilitates the process by which surplus units (individuals or institutions with available short-term funds) can transfer funds to deficit units (institutions or individuals in need of funds).
