international finance全套教学课件.ppt

International Finance Contents Contents Chapter 1 Balance of payments Chapter 4 Fixed, Floating and Managed Exchange Rates Chapter 5 Models of the foreign exchange determination Chapter 6 Fixed, floating and managed exchange rates Chapter 7 Currency futures, options, and swaps Chapter 8 International lending and financial crises Chapter 9 International monetary system Chapter 10 The Euro currency and Eurobond markets Currency swaps have evolved as a successor to back-to-back loans or parallel loans. Currency swaps differ from parallel loans in that the settlement of all payments is carried out on the basis of an exchange rate agreed upon when the contract is initiated. They normally involve an exchange of the principal amounts of the contract. Therefore, a currency swap consists of three stages, which can be illustrated by assuming two counterparties, A and B. Counterparty A has a comparative advantage in raising Australian dollar loans but needs Japanese yen funds, whereas B has a comparative advantage in raising Japanese yen loans but needs Australian dollar funds. The implication here is that A can raise Australian dollar loans at a lower rate than B, and vice versa. Thus, it makes a lot of sense if A raises Australian dollar loans while B raises yen loans and then they exchange (swap) the loans. Both, as a result, save on the cost of borrowing. The following stages are then involved in a currency swap: 1. The counterparties exchange the principal amounts at the commencement of the swap. 2. On the interest payment dates, A pays B the interest due on the yen loan, whereas B pays A the interest due on the Australian dollar loan. 3. On the maturity of the contract, the principal amounts are re-exchanged. Interest rate swaps The basic kind of interest rate swap, called a fixed-for-floating swap, involves the exchange of a notional principal valued at fixed and floating (variable) interest rates denominated in the same currency. Fig