Главная->Інші підручники->Содержание->¨ READ AND DISCUSS

English_for_Finance_and_Banking

¨ READ AND DISCUSS

1.a) Supply the prepositions where necessary.

b) Write down 3-5 questions about the text.

c) Describe the components of the global financial markets.

Global Financial Markets

The global market for finance encompasses a complex web of financial instruments and institutions. Its structure and functioning are affected in fundamental ways … the macroeconomic environment

(in particular, patterns of interest rates and exchange rates), the regulatory and technological environment, and fundamentals driving the real sector of the international economy.

The cash and derivative instruments that compose global financial markets rest … four cornerstones: 1)foreign exchange market, 2) the Eurocurrency market, 3) the market of intermediated credit facilities and debt instruments and 4) the equities market.

Foreign exchange (Forex) market stands … the core of the global financial market. It encompasses spot as well as forward interbank and customer transactions, as well as Forex futures and options, traded ... various organized exchanges around the world.

Motivations for Forex transactions range … short-term positioning (speculating) to hedging ... commercial or investment transactions via outright forwards, forex swaps, futures or options.

Forex Market is a structure upon which most other segments … the global financial markets are built.

A second cornerstone is the Eurocurrency Market. Eurocurrency financial items are claims that are created in one country but denominated ... the currency of another. The Eurocurrency system comprises the markets within which these claims are created and traded. This activity originated ... Europe but now takes place … the world. Three broad classes of financial items are involved:

1) bank deposits and credits, for example, dollar deposits held ... European banks;

2) primary securities in the form of Eurobonds and Euronotes; and 3) derivative securities such as foreign currency options or futures on Eurodollar uistruments.

Initially, Eurocurrency financial items were denominated pritnarily ... dollars. Today, there are many currencies of denomination, with the Deutchemark and Yen playing an increasingly important role. As in the foreign exchange market, the core of this market consists ... major dealing banks that consistently quote bid and offered prices in active interbank trading. The Bank of England samples these interest rates daily for a group of reference banks and publishes an average of the two sides of title market as the London interbank bid (LIBID) and offered (LIBOR) rates. LIBOR has become the most important floating-rate pricing benchmark for loans and debt instruments … the global financial markets.

International lending and issuance of debt securities represents the third major segment of the global financial market.

Perhaps the most long-standing form of international lending involves trade financing, whereby a foreign buyer agrees to pay ... imported merchandise after a period of time.

A corporation or government requiring general international bank financing can borrow ... foreign-based financial intermediaries under a variety of structures ranging from revolving credit facilities, term loans and project financing, to various kinds of secured credits.

An alternative ... bank financing available ... many corporate and governmental borrowers is to issue debt securities (like commercial paper or government bills).

The fourth cornerstone of the global financial market involves equities, that is, common preferred shares. Corporations seeking to raise equity capital may issue shares in the domestic market through the uriderwriting channels and simultaneously distribute them ... foreign investors.

Words you may need:

web – павутиння, сплетення

regulatory environment – правове поле

fundamentals – основи

drive – приводити в рух

derivative instruments – похідні інструменти

Eurocurrency market – євровалютний ринок

credit facilities – кредити, джерела кредитування

core – серцевина, ядро

positioning – встановлення позиції

hedging – хеджування

claim – вимога

primary securities – первинні цінні папери

Euronote – євро нота (1-6-місячний вексель)

sample – відбирати (зразки)

reference banks банки – банки, чиї процентні ставки використовуються при розрахунку ЛІБОР та інших ставок-орієнтирів

London interbank bid rate (LIBID) – ставка покупця на лондонському міжбанківському ринку депозитів (ЛІБІД)

London interbank offered rate (LIBOR) – ставка продавця (пропозиції) на лондонському міжбанківському ринку депозитів (ЛІБОР)

debt security – цінний папір, що являє собою боргове свідоцтво

long-standing – давній

trade financing – фінансування торгівлі

merchandise – товари

foreign-based – той, що розміщений за кордоном

revolving credit facilities – револьверний кредит

term loan – термінова позика

project financing – фінансування проектів

secured credit – ломбардний кредит (кредит під забезпечення цінними паперами, що швидко реалізуються)

commercial paper – „комерційні папери”, векселя

2. a) Fill each gap with a suitable word from the box.

b) Sum up the text in 5-7 sentences. Present your sentences to the class.

c) Describe the basic functions of the Eurocurrency markets.

function operating conducted

try client need

borrow perform offer

deal organized leading

bank restrictions borrowers

The Eurocurrency Market

One of the most well-developed sectors of the Global Financial Market is the Eurocurrency Market. The Market refers to funds channelled via financial intermediaries from international lenders to international _________ . The large multinational banks dominate this business and have played a _________ role in the development and growth of these "offshore" markets.

The Eurocurrency markets __________ the short to medium term debt required by banks, corporate customers, and government borrowers. The sources of these funds are domestic _________ deposits whose ownership is transferred to banks outside the controlled domestic monetary systems.

The Eurocurrency market is therefore ________ and sustained by the large international banks and operates at two levels. Firstly, there is the very competitive wholesale market _________ in London, in which these banks sell their funds to each other at the London interbank offering rate (LIBOR). This business is mainly ________ via telephone, and thus only the highest quality banks can __________ in the wholesale market. Secondly, smaller banks, corporate borrowers, national governments (in the late 1970s from Eastern Europe or developing countries and now primarily the Western industrilized countries) can loans from this market. In

this large-scale "retail" loan market the large international banks only lend the offshore deposits alter detailed credit, investigation of the _________.

The Eurocurrency markets _________ three basic functions. Firstly, they are extensively used for foreign exchange hedging purposes as the banks _________ to balance out their foreign assets and liabilities. The banks therefore take positions in the Eurocurrency market to cover the forward commitments they have made with their customers. Secondly, Eurocurrency markets can at times bypass domestic channels of financial intermediation, especially when governments impose tight credit . For example, US corporations can acquire Eurodollars in London. These deposits may be US domestic dollar deposits that have been transferred abroad, during a US domestic predit squeeze. The third ___________ is the full international intermediation role of channelling surplus liquid resources from, say, OPEC countries to those countries or corporations who to borrow.

Words you may need:

via – за допомогою, через

to take position – встановлювати позицію

at times – час від часу

bypass – обходити

credit squeeze – „стиснення кредиту” (заходи держави по обмеженню кредиту споживачам)

3.Read the text quickly to find the types of most widely used swaps:

Foreign Exchange Swaps

Swaps are transactions in which two parties swap financial assets by linking a foreign exchange transaction in cash to an opposite futures business in the same currency.

Foreign Exchange Swap Markets have developed since the early 1980s. The oldest type of swap is the conventional foreign exchange deal whereby one currency is simultaneously bought spot and sold forward against another – meaning an immediate exchange of cash followed by a further reverse exchange at a specified date in the future.

The idea of swapping has now spread further. By far the largest business volume amongst swaps occurs n the so-called "vanilla interest rate swap". A "plain vanilla", or fixed-to-fixed foreign exchange, or currency swap is аn exchange of the principal and interest payments associated with a fixed-rate loan in one currency for the principal and interest payments on a similar loan in a second currency. The first such swap between IBM and the World Bank was done in 1981. Since then the swap market has grown to over $ 1 billion and, in the process, has evolved several additional types of currency swaps.

Words you may need:

Foreign Exchange Swap – валютний „своп”

to buy spot – придбати на умовах „спот”

followed by – за яким слідує ...

vanilla interest rate swap – „своп” процентний

plain vanilla – простий процентний „своп”

evolve – розвиватись, еволюціонувати

4. Read the text quickly to find answers to the following questions:

· What does the price of a foreign exchange option depend on?

· What are the prospects for the option markets?

Foreign Exchange Options

Options as a fiinancial instrument have a reasonably short history in financial markets, with the first option contracts being traded in Chicago in 1973. In foreign exchange, a call option on the US dollar is the right to buy the US dollar, and a put option is the right to sell the US dollar. To purchase an option, the buyer has to pay a premium. Тo write an option, the seller receives a premium.

There are three different types of users of foreign exchange options: the corporate treasury, the fund manager, and the commercial bank trading room. For example, in the currency option markets, the corporate treasury can buy the right, but not the obligation, to sell or buy currency forward, if required. This option, to decide whether to buy or sell currency, is particularly important when the firm is unsure about the timing or size of foreign currency receipts or payment.

International banks, in their turn, use currency options for their customers and for their own trading. In the past few years, nearly all dealing rooms have seen a large growth in the use of currency options and banks have started employing traders purely to trade currency options for the bank's own account.

Options are also sold "over the counter" (OTC) in a manner similar to currency forward contracts. OTC contracts have very flexible terms arranged by negotiation between the (normal bank) supplier and corporate buyer. Thus the currencies to be bought and sold can vary according to the corporate customer's needs and do not have to correspond to exchange market conventions. Amounts, duration of the option, and price can all be negotiated and matched to the corporate customers' exposure.

The volume of trading on the OTC market between banks is even higher than on the listed options market. There is no public secondary market in OTC currency options but trading is conducted by telephone using prices available on screen systems provided by large international (commercial and investment) banks. MNCs are major users of OTC options and are key participants in the screen markets. These OTC markets are closely linked to spot and forward markets in currency in which the banks and MNCs also play central roles.

The organized currency option exchanges provide an important public pricing mechanism for the MNC treasurer and may also provide a suitable currency option contract for foreign cash flows of known size but uncertain likelihood of occurrence.

The price of a foreign exchange option depends on: the length of a period desired to be covered by the option; the underlying volatility of the foreign exchange market; the relationship between the spot exchange rate and the desired price or the desired strike price; option premium; foreign interest rate.

Moreover, the type of currency option that financial institutions, corporations and the like can trade in vary from the extremely simple to the very sophisticated. It is possible to design tailor-made foreign exchange options to suit requirements, as essentially a foreign exchange option is akin to an insurance premium on the foreign exchange market. All this makes this instrument very attractive.

Within the past fifteen years the use of options has grown in all financial markets. It seems quite likely that foreign exchange options will grow further in coming years.

Words you may need:

call option – опціон „кол”

put option – опціон „пут”

to write an option – виконати опціон

corporate treasury – підрозділ у корпорації що займається управлінням її вільними коштами

to sell (buy) forward – продати (купити) на термін

convention – конвенція, договір

strike price – ціна виконання

and the like – і тому подібне

tailor-made – з врахуванням потреб замовника

to be akin (to) – бути близьким (чому-небудь)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145

Категорії

English_for_Finance_and_Banking

Схожі підручники