F|N2101 BUSINESS FINANCE
FIN2101 BUSINESS FINANCE II
Module 11 International financial Management
Module 11 International Financial Management
Student Activities Reading Text, Chapter 20 Text study Guide chapter 20 Study Book, Module 11 Tutorial work Tutoria/ Workbook, Self Assessment Activity 11.1 Text Study Guide, Chapter 20, All
Student Activities Reading ◼ Text, Chapter 20 ◼ Text Study Guide, Chapter 20 ◼ Study Book, Module 11 Tutorial Work ◼ Tutorial Workbook, Self Assessment Activity 11.1 ◼ Text Study Guide, Chapter 20, All
Lecture overview Foreign exchange (FOREX market Transactions in FOREX market FOREX rates and quotes EXchange rate risk Political risk International investment and financing decisions
Lecture Overview ◼ Foreign exchange (FOREX) market ◼ Transactions in FOREX market ◼ FOREX rates and quotes ◼ Exchange rate risk ◼ Political risk ◼ International investment and financing decisions
Relevance of International Finance Firms are part of and operate in a highly globalised and integrated world economy Australian-dollar denominated financial instruments are traded among a wider clientele of international investors and borrowers The profitability of Australian importers and exporters is affected by exchange rate fluctuations
Relevance of International Finance ◼ Firms are part of and operate in a highly globalised and integrated world economy. ◼ Australian-dollar denominated financial instruments are traded among a wider clientele of international investors and borrowers. ◼ The profitability of Australian importers and exporters is affected by exchange rate fluctuations
FOREX Market Where FOREX (different currencies) is(are) traded As a result of these transactions, FOREX rates between different currencies are determined for example, 1 AUD/0.5185 USD FOREX management is implemented FOREX activities are based on supply and demand
FOREX Market ◼ Where FOREX (different currencies) is (are) traded. ◼ As a result of these transactions, FOREX rates between different currencies are determined, for example, 1 AUD / 0.5185 USD. ◼ FOREX management is implemented. ◼ FOREX activities are based on supply and demand
Market Characteristics Largest financial market in the World -1.2 trillion Usd traded daily in 2001 Highly integrated Operates 24 hours a day London, New York and tokyo dominate the market activity (75%o of turnover
Market Characteristics ◼ Largest financial market in the world – 1.2 trillion USD traded daily in 2001. ◼ Highly integrated. ◼ Operates 24 hours a day. ◼ London, New York and Tokyo dominate the market activity (75% of turnover)
FOREX Market Structure TWo tiers Interbank market wholesale large transactions Retail market small scale transactions
FOREX Market Structure Two tiers: ◼ Interbank market - wholesale, large transactions ◼ Retail market - small scale transactions
Where s The market? An over-the-counter(OTC) market There is no one market place a Transactions occur in trading rooms by telephone, telex, computer, automated dealing systems Trades must be conducted by authorised dealers(80-90), licensed by the rba
Where Is The Market? ◼ An over-the-counter (OTC) market. ◼ There is no one market place. ◼ Transactions occur in trading rooms by telephone, telex, computer, automated dealing systems. ◼ Trades must be conducted by authorised dealers (80-90), licensed by the RBA
Market Participants Bank and non-bank dealers Individuals and firms exporters/importers Tourists Speculators/ arbitragers a Central banks foreX brokers
Market Participants ◼ Bank and non-bank dealers ◼ Individuals and firms - exporters/importers ◼ Tourists ◼ Speculators/arbitragers ◼ Central banks ◼ FOREX brokers