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2021 | Book

International Finance

New Players and Global Markets

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About this book

The landscape of international finance has drastically changed within the last decade. The institutions inherited from the Bretton-Woods conference—the IMF and the WBD— have become obsolete, in part, due to their lack of reforming. Meanwhile newly created institutions including The New Development Bank and the Asian Infrastructure Investment Bank are increasing their sphere of influence. Developing countries from Africa, Asia, and Latin America are more eager than ever to work with the NDB or the AIIB. Meanwhile, new players such as Sovereign Wealth Funds are reshaping financial markets, through their weights and influence in global markets. The book looks to enhance understanding of the real markets of international finance and proposes ways to bring the old and new players together in this sand-shifting world of international finance.​

Table of Contents

Frontmatter
Chapter 1. International Finance
Abstract
International finance is an important tool to find the exchange rates, compare inflation rates, get an idea about investing in international debt securities, ascertain the economic status of other countries, and judge the foreign markets.
Felix I. Lessambo
Chapter 2. International Institutions of International Finance
Abstract
For very long the Bretton Woods institutions provided the architecture of international financial institutions. The post-Bretton Woods era which started in 1973 has altered the mandates of the two key institutions: The IMF was assigned new roles in international monetary system, and the World Bank champions the fight against poverty in order to lift up its member countries in the path of sustainable economic growth. However, the governance of these two institutions has frustrated developing countries (BRICS) to develop parallel institutions: The new Development Bank, and The Asian Infrastructure Investment Bank, which have extended the framework of international financial institutions.
Felix I. Lessambo
Chapter 3. The Balance of Payments
Abstract
A country’s balance of payments tells whether it saves enough to pay for its imports. The BoP is divided into three main categories: the current account, the capital account, and the financial account. Within these three categories are subdivisions, each of which accounts for a different type of international monetary transaction. In accordance with the general principle of double-entry business accounting, every increase in an asset must be offset by a decrease in another asset or by an increase in a liability, and a decrease in an asset must be offset by an increase in another asset or by a decrease in a liability.
Felix I. Lessambo
Chapter 4. International Corporate Governance
Abstract
For so long, the concept of “shareholder primacy,” or a corporation’s duty to maximize shareholder value was considered as the governance norm, but things begin to change. In August 2019, the Business Round Table (The Business Roundtable, which represents the chief executives of 192 large companies in the United States.) released a statement which reads: “Investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals.”
Felix I. Lessambo
Chapter 5. Foreign Exchange and Money Markets Transactions
Abstract
Foreign currency transactions are transactions denominated in a currency other than the entity’s functional currency. Foreign exchange risk represents exposure to changes in the values of current holdings and future cash flows denominated in other currencies. The most used techniques in measuring FX risk are: (i) hedging, (ii) FX gap analysis, (iii) FX rate duration analysis, (iv) FX rate simulation analysis, and (v) FX rate volatility analysis. Money market instruments are securities that provide businesses, banks, and the government with large amounts of low-cost capital for a short time. The period is overnight, a few days, weeks, or even months, but always less than a year. The International Monetary Market (IMM) was formed in December 1971 and was established in May 1972.
Felix I. Lessambo
Chapter 6. International Equity Markets
Abstract
The international equity market is one of the most important sources for the company to raise the money. This allows businesses to become publicly traded and raise additional financial resources for expansion of their operations by selling shares of ownership of the company in a public market, across the globe. The New York Security Exchange (NYSE) is the world’s most trusted equities exchange, with a market model designed to deliver optimal market quality to large corporates and investors.
Felix I. Lessambo
Chapter 7. International Bond Markets
Abstract
The international bond market allows investors to diversify their portfolio, preserve their wealth, and realize attractive returns on their investment. International bond markets are not unified into a single market (like FX and Eurocurrency market), therefore, they can be done OTC. International bond market participants are those involved in the issuance and trading of debt securities. It primarily includes government-issued and corporate debt securities.
Felix I. Lessambo
Chapter 8. International Derivative Markets
Abstract
Derivatives improve the efficiency of financial markets and, by permitting more financial risks to be hedged, may permit some borrowers more access to sources of funds. Derivatives are a double-edged sword in that (i) they can be used to manage risk, and (ii) they can become financial weapons of mass destruction if used solely for speculative purposes. Managing derivatives positions has shown to be tricky since only a small amount (“margin”) is needed to establish a position. That may hide the full extent of a firm or bank financial obligations.
Felix I. Lessambo
Chapter 9. Exchange Traded Funds (ETF)
Abstract
ETFs arose to address all the weaknesses and capture all the benefits of mutual funds. Just like closed-end funds, they trade in the markets continuously, and just like open-end funds, they can be created and redeemed at any time by investors. The purpose of an ETF is to match a particular market index, leading to a fund management style known as passive management, which is the chief distinguishing feature of ETFs, and it brings a number of advantages for investors in index funds.
Felix I. Lessambo
Chapter 10. International Securitization Markets
Abstract
Securitization creates a financial instrument by bundling financial assets, such as individual loans, and then selling different tiers of the repackaged instruments to investors. The process transforms a pool of otherwise illiquid assets into tradable securities, enabling investors to purchase a small share of a large asset pool.
Felix I. Lessambo
Chapter 11. Sovereign Wealth Funds
Abstract
A sovereign wealth fund is an investment pool of foreign currency reserves owned by a government. SWFs have become a great source of liquidity for many MNCs in dire need of cash. They constitute an unorthodox financial market, per se. It would be a mistake to encourage the perception that foreign investment, even from government-owned entities, is a threat to national security.
Felix I. Lessambo
Backmatter
Metadata
Title
International Finance
Author
Dr. Felix I. Lessambo
Copyright Year
2021
Electronic ISBN
978-3-030-69232-2
Print ISBN
978-3-030-69231-5
DOI
https://doi.org/10.1007/978-3-030-69232-2

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