Bob Steiner's Foreign Exchange and Money Markets: Theory, Practice and PDF

Risk Management

By Bob Steiner

Floating premiums, central-bank intervention, derivatives buying and selling and the very excessive volumes of speculative and round the clock buying and selling are only a number of the aspects of the foreign currency echange industry that make it a hugely dynamic and unstable enviornment. This ebook addresses the sensible functions of forex trading and cash marketplace buying and selling and offers finished insurance of those markets. assurance contains:

  • What the tools are
  • How and why they're used - by way of either financial institution purchasers and company end-users
  • How the various tools are associated one to another
  • How you expense them
  • Structure of the marketplace, EMU etc
  • The variety of hazards coming up from dealings in those tools that have an effect on banks and corporates
  • How those dangers are measured and controlled
  • Brings jointly a variety of sensible, appropriate fabric on foreign currency and funds industry trading
  • Focuses on buying and selling occasions in addition to on calculations
  • International in insurance, the strategies and techniques coated are usually not limited to any nation or institution

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Read or Download Foreign Exchange and Money Markets: Theory, Practice and Risk Management (Securities Institute Global Capital Markets) PDF

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Extra info for Foreign Exchange and Money Markets: Theory, Practice and Risk Management (Securities Institute Global Capital Markets)

Sample text

Second, calculate how much the bank will need to borrow at current market rates, from now until that original maturity date, in order to repay that same amount as originally expected. If the bank repays this amount to the depositor, it will be neither losing nor gaining. This amount is in fact the present value of the original maturing principal and interest. The rate of discount to be used is the rate at which the bank believes it could borrow new money, taking into account any spread over LIBOR which it typically pays.

The answer is the discount amount on the investment. With the same investment as above, if he will receive back GBP 110 at the end of the year but only invests GBP 100 at the beginning, there is a discount amount of GBP 10. 091% of the GBP 110 received at the end. 091%. In general, the discount rate is the amount of discount expressed as a percentage per year of the face value, rather than as a percentage per year of the original amount paid. The discount rate is always less than the corresponding yield.

If the market believes that the central bank is about to change official 3-month rates, for example, this expectation will already have been factored into the market 3month rate. • Borrowing demand An increase or decrease in borrowing in any particular maturity will tend to increase or decrease yields at that maturity. For example, if the government either increases or decreases its borrowing requirement, this will affect the yield curve at the maturities sought by the government. Similarly if the government shortens or lengthens the maturity of its debt when it rolls over maturing debt, this tends to make longer-term yields lower than shorter-term yields or vice versa.

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