Scribd Logo
Upload

Welcome to Scribd!

  • 382 views

    Instruments of International Money Market

    Uploaded by

    RahOsh Maan
    The document discusses various instruments in the international money market. It describes banker's acceptances and letters of credit which are used to finance international trade. Eurocurrency time deposits and certificates of deposits allow investors to deposit funds in foreign currencies. Euro notes and commercial papers are short-term unsecured promissory notes issued by banks and corporations. Medium-term notes are fixed rate corporate bonds of shorter maturity than traditional bonds. Floating rate notes pay interest that floats and resets periodically based on LIBOR.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    Instruments of International Money Market

    Uploaded by

    RahOsh Maan
    382 views11 pages
    The document discusses various instruments in the international money market. It describes banker's acceptances and letters of credit which are used to finance international trade. Eurocurrency time deposits and certificates of deposits allow investors to deposit funds in foreign currencies. Euro notes and commercial papers are short-term unsecured promissory notes issued by banks and corporations. Medium-term notes are fixed rate corporate bonds of shorter maturity than traditional bonds. Floating rate notes pay interest that floats and resets periodically based on LIBOR.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses various instruments in the international money market. It describes banker's acceptances and letters of credit which are used to finance international trade. Eurocurrency time deposits and certificates of deposits allow investors to deposit funds in foreign currencies. Euro notes and commercial papers are short-term unsecured promissory notes issued by banks and corporations. Medium-term notes are fixed rate corporate bonds of shorter maturity than traditional bonds. Floating rate notes pay interest that floats and resets periodically based on LIBOR.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    382 views11 pages

    Instruments of International Money Market

    Uploaded by

    RahOsh Maan
    The document discusses various instruments in the international money market. It describes banker's acceptances and letters of credit which are used to finance international trade. Eurocurrency time deposits and certificates of deposits allow investors to deposit funds in foreign currencies. Euro notes and commercial papers are short-term unsecured promissory notes issued by banks and corporations. Medium-term notes are fixed rate corporate bonds of shorter maturity than traditional bonds. Floating rate notes pay interest that floats and resets periodically based on LIBOR.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    Introduction

    Market for short term financing Investment instruments that are traded or issued internationally. Core of this market is euro currency market.

    Features Of International Money Market

    Reconcile the cash needs of deficit units with needs of surplus units. High degree of safety of principal No central location

    INSTRUMENTS
    Bankers acceptance and Letter of credit Euro notes and euro commercial papers Floating rate notes Euro currency time deposits and certificate of deposits Medium term notes and deposit notes

    Bankers Acceptance
    Bankers acceptance arise from international trade. International trade transactions are financed by banks. Obligation by a specific bank to pay a certain amount on a certain date in the future.

    Letter of credit
    Legal commitment on the part of the bank in which the bank promises the exporter to pay on behalf of the importer upon presentation of documents conveying title of the goods.

    Eurocurrency time deposits

    Non negotiable time deposit


    Cancelling a time deposit is expensive, so investor sacrifices liquidity. Those who want greater liquidity, invest in shorter liquidity.

    Eurocurrency certificate of deposits


    It is a time deposit that is transferable.

    Euro Notes and Euro Commercial Papers


    Short term instruments Unsecured promissory notes issued by corporations and banks. Euro notes encompasses note issuance facilities. It can be:

    Underwritten Non Underwritten

    With the support of a medium term commitment by a group of banks to provide funds. Without the support of a medium term commitment by a group of banks to provide funds.

    Medium Term Notes

    Issued by international banks. Fixed rate corporate bonds but of generally shorter maturity Regarded by institutional investor as a temporary investment that can be designed to suit particular investors requirements. MTN financing is often described as Investor Driven. Problem with MTNs is lack of liquidity. Yield calculated in the same way as bond yield.

    Floating Rate Notes Instrument was introduced in early 1970s. Interest rate floats.
    Pays a three or six months interest rate set ABOVE, AT or BELOW LIBOR (London inter bank offered rate). Interest rate set every 3 or six months to a new level based on prevailing LIBOR level at the reset date. LIBOR It is the average interest rate which the leading banks in London charge when lending to other banks. It is a benchmark for finance all over the world.

    Features of FRNs
    Reference rate Margin

    Coupon payment frequency


    Maturity

    Reference rate period

    You might also like