《金融英语》课件-International+Finance+(I)

InternationalFinance

SchoolofEnglishStudies,

TianjinForeignStudiesUniversity

TheScoreArrangementTotalScore=Ordinary(30%)+FinalExam(70%)IntroductionTo“Finance”FromNational,Corporate,AndPersonalProspectsBank(lender)Publicinvestorsacompany(borrower)capitalprincipalwithinterestsA.Financev.Providecapital(money)andcapitalmovement，withfinancialinstitutionsasintermediaries,inChinesemeans“融资”.a)indirectfinance,withcommercialbanksasintermediaries:AcompanyBorrowsshort-termfundsfromcommercialbanks.Anditisatemporarytransferofownershipoffundsfromthebanktotheborrower,andtheborrowerpromisestopaybackprincipalwithintereststothebankinthefuture.Acompanymayborrowlong-termfundsbyissuinglong-termcorporatebondstothepublic.Itisatemporarytransferofownershipoffundsfromthebondbuyers(investors)tothecompany.Andthecompanypromisestopaybacktheprincipalwithintereststothebondbuyersinthefuture.Here,commercialorinvestmentbanksplaytheroleoffinancialintermediationandcollectfeesforthisservices,insteadofinterests.investors(lender)acompany(borrower)dividendsb)directfinance,withinvestmentbanksasintermediaries:providingfundsthrubuyingshares

AcompanyAcquireslong-termfundsbyissuingstockstothepublic.Andtheinvestorsbecometheshareholders(owners)ofthecompany.Theshareholdershavethevotingpowersandmakedecisionsonsomeimportantissuesofthecompany.Andthecompanywillgivethedividendstotheshareholdersinthefutureifmakingprofits.B.Finance(fromnationalperspective)n.inChinesemeans“国家财政”.

Hence,governmentsusuallyusetwomethodstocoverfiscaldeficits.Oneisraisetaxrate(itmaycausedissatisfactionfromthepublicdirectly),anotheristoissuetreasurybondstocoverdeficits(itmeansthegovernmentwillborrowmoneyfromthepublicandguaranteetorepayprincipalwithintereststothepublicinthefuture).Governmentsobtainrevenuesfromcollectingtaxesandusetheserevenuesforpublicexpenditures,suchassocialwelfare,militaryexpenditures,education,environmentalprotection,andsoon.If,revenues>expendituresfiscalsurplusesIf,revenues<expendituresfiscaldeficitsC.Finance(fromcorporateperspective),inChinesemeans“公司财务”.Foracompany,itsassetsarecomposedofequity(所有者权益/自有资金）andliabilities(负债）.

Assets=Equity+Liabilities

borrowmoneyfrombankorissuecorporatebondstopublicNote:Borrowingfrombankisshort-termdebtfinance,whileissuingcorporatebondsislong-termdebtfinance.

yourownmoneyorissuestocktopublictoraisecapitalD.Finance(frompersonalperspective)ismoneymanagement,inChinesemeans“个人金融（理财)”.

It’sabouthowtoallocateyourpersonalincomesforconsumptionandinvestments,suchassavings,buyingfinancialproducts(T/B,housing,stocks,insurance,futures,mutualfunds,foreignexchanges,andsoon)fromfinancialinstitutionstoearnmoremoney,butthereisariskforanyinvestment.RiskReturne.g.buystocks

RiskReturne.g.buyT-bondsReferenceBooksForLearningFinance&Economics：1、《金融学》,曹龙骐等,高等教育出版社。

2、《金融市场学》，张亦春、郑振龙等,高等教育出版社。

3、《国际金融学》，姜波克,高等教育出版社。

4、《货币金融学》，殷孟波，中国金融出版社。

5、《宏、微观经济学》，Paul.Samulson

&

William.Nordhaus,

机械工业出版社。

6、《经济学原理》，GregoryMankiw,机械工业出版社。

7、《中央银行英语教程》、《商业银行英语教程》、

《证券市场与投资银行英语教程》，李若谷、张燕铃、和广北等，新华出版社。

8、《金融市场与机构》，JeffMadura,

北京大学出版社。RecommendedMediaforLearning

Finance&Economicswww.FT.comwww.Ewww.WSJ.comwww.Bwww.F《21世纪经济报导》(报纸)《经济观察家报》(报纸)《财经》(杂志)中央电视台经济频道《经济半小时》节目中央电视台经济频道《中国财经报道》节目Biz-China,EnglishChannel,CCTV-9Unit1.MoneyI.MoneyA.Definitionofmoneyandreviewofmoney’shistory.a)Moneyisdefinedasanythingthatisgenerallyacceptableinpaymentforgoodsandservices,orindischargeofdebts.b)Inthepast,manythingshaveservedtheirturnasmoney,suchasdecorativeshells,beads,stoneaxes,bronze,goldandsilver.c)Nowadays,forourdailypointofview,moneyreferstonotes,coins,checks,travelingchecksanddeposits.d)Thedifferencebetweencurrencyandmoney:Currencyreferstonotesandcoins,whilemoneycoversmorethancurrency,suchaschecks,travelingchecksanddeposits.B.Reasonsforusingmoney:a)Theuseofmoneyenricheseconomiclifebybroadeningthescopeofexchange,productionandconsumption.Itbroadensthescopeofexchangebyeliminatingtheneedfora“doublecoincidenceofwants”necessityinbartertrade.b)Itamplifiestherangeofgoodsandservicespeoplecanproducebymakingpossibleawiderspecializationanddivisionoflabor.c)Moneyaddsflexibilitytoeconomicconsumption.Itenableseachconsumertodistributehisspendingashewishes(Hecanchoosetospendallhisincomesimmediatelyorchoosetoexercisetheoptionoftransferringsomehisconsumptiontofuturewhenhemayenjoyitmore.)II.FunctionsofMoneyA.MediumofExchange(流通手段）—basicfunctionB.StandardofValue(价值尺度）—

basicfunctionC.StoreofValue(价值储藏）D.StandardofDeferredPayment(延期支付标准）F.WorldCurrency(世界货币）

Duetothedevelopmentofinternationaltrade,somecurrencieshavecrossedborderandplayedtheroleofworldcurrency,suchasUSdollars,Euro,JapaneseYen,andBritishpounds.III.MoneySupplyA.Theavailablequantityofmoneyatamomentiscalledthemoneysupply.(是指货币存量，是一个国家或一个地区在某一时点上的现金存量和银行存款的总和，其中银行存款占的比例较大。）B.Basedontheliquidityoffinancialassets(liquidityoffinancialassets指存款和信用工具转化为现金的速度和成本),thecentralbankcomputes3seriesofmoneysupply:i)Internationalexplanationofmoneysupply:

M1=C+DdM2=C+Dd+DtM3=C+Dd+Dt+Dn(Non-bankingfinancialinstitutions)ii)Chineseexplanationofmoneysupply:M0=CashM1=Cash+Dd

M2=M1+Quasi-Money(includingDt+marginsofsecuritiesfirms+otherdeposits)C.Broadly-definedmoney（广义货币）&narrowly-definedmoney（狭义货币）

M1constitutesanarrowly-definedmoneysupply,whileM2andM3arebroadly-definedmoneysupply.D.KnowingMoneysupplyisthebasisforlearningmonetarypolicy(货币政策）.

Monetarypolicy:i)Whenthecentralbankincreasesmoneysupply,moremoneyispumpedintotheeconomicsystemanditpromotestheeconomicgrowthandmaycauseinflation(andthenincreaseinterestratetocurbinflation);ii)Whenthecentralbankdecreasesmoneysupply,lessmoneyisintheeconomicsystemanditslowsdowntheeconomicgrowthandmaycausedeflation(andthenlowerinterestratetostimulatetheeconomy).Unit2.BalanceofPaymentsI.DefinitionofBalanceofPaymentsBalanceofPayments(BOP)referstoasystemofgovernmentaccountsthatrecordsandcatalogsacountry’sexportsandimportsaswellastheflowofcapitalandgiftsbetweentheresidentsofthecountryandresidentsofothercountriesduringaspecifictimeinterval.II.TwoPrinciplesofBOPNaturalPersonA.ResidentsLegalPerson(Enterprises&PublicAgencies)e.g.ForanMNC,suchasGeneralMotor(GM)forChina’sBOP:ParentinAmericaSubsidiaryinChinaso,foreignresidentregardedasChina’sresidentsNote:“Hence,salesbyaparentfirmtoaforeignsubsidiaryresultinbalanceofpaymentsentries,eventhoughthetransactiontakesplacewithinasinglecorporation.”B.Double-EntrySystem(复式记帐法）Eachtransactiongivesrisetobothacreditentry(贷记)

anddebitentry(借记）ofBOPindifferentcountries.CreditDebit

Inflowofcapital+-Outflowofcapitali)AlltransactionsinvolvingpaymentsfromforeignerstoacountryareenteredinBOP“receipts”columnwithaplussignal(+)toreflectthattheyarecredits,whichresultsininflowoffundstothecountry.ii)Allpaymentstoforeignersareenteredinthe“payments”columnwithaminussignal(-)toreflectthattheyaredebitsbecausetheyresultinoutflowsoffundstoothercountries.III.ImportantSectionsofBOPA.CurrentAccount(经常项目帐户）i)Merchandise-Imports&Exportstangiblegoods(有形商品）ii)Services（服务）-intangiblegoods（无形商品）

transportation运输

tourism旅游

insurance保险

communication通讯

e.g.costCIFinsuranceBasedontherequirementsofBOP,thesetwopartsareputinto“Services”.freightiii)

UnilateralTransfer(单方面转移、无偿转移）

Governmentaids得到“+”，支出“-”Remittancefromrepatriation汇入“+”，汇出“-”NetCurrentAccountBalanceNote：经常项目差额（主动获得外汇的多少），如果此项为正，国家处于主动地位；如果此项为负，国家需要用其他项目弥补，处境较被动。B.CapitalAccount(资本帐户）i)DirectInvestment(直接投资/利润)Long-termCapital(长期资本）

ii)PortfolioInvestment(证券投资/股息、红利）iii)Short-termCapital(短期资本）NetCapitalAccountBalanceC.OfficialReserveAccount(官方贮备帐户）i)Goldii)ForeignExchangeiii)SDRs(特别提款权）

（PositioninIMF-在IMF的贮备头寸）NetOfficialReserve(Note:SpecialDrawingRights(SDRs)areissuedtogovernmentsbyinternationalmonetaryfunds(IMF)tosettleinternationaldebtsandhavereplacedgoldininternationalfinancialtransaction.)gold25%SDRsforeignexchangedomesticcurrency75%

SDRs相当于股份公司，每个国家购买一定的份额（Share),此财产属于基金组织财产，存于本国中央银行，待IMF需要时动用。现在，美国占有份额的17.47%，居首位，中国占有份额的2.99%，居第八位。

经常项目顺差+资本与金融项目顺差官方储备增加（中国情况）经常项目顺差>资本与金融项目逆差官方储备增加

经常项目逆差<资本与金融项目顺差官方储备增加（美国情况）经常项目逆差+资本与金融项目逆差官方储备减少

经常项目逆差>资本与金融项目顺差官方储备减少

经常项目顺差<资本与金融项目逆差官方储备减少D.ErrorsandOmissions(净错误和遗漏）Theestablishmentofthisaccountistofillthegaponthebookkeepingartificially.Theoretically,CurrentAccount+CapitalAccount=OfficialReservesPractically,CurrentAccount+CapitalAccount=OfficialReserves(Duetoincompletefiguresandsmuggling.)F.ComparativeAnalysisMethodsa)HorizontalAnalysis:CompareBOPwithothercountries’BOPs.b)VerticalAnalysis:CompareBOPwithyourownBOPsBefore.IV.AnalysisImplications(EquilibriumofBOP)A.ImplicationsoffavorableBOP&unfavorableBOPa)Itreferstotradeequilibrium,whichmeansthatexportsequalimports.Ifexportsexceedimports,tradesurpluswillappear.Andifexportsarelessthanimports,tradedeficitswillappear.b)Thesecondimplicationiscurrentaccount’sequilibrium.Iftradeitemrunsadeficit,theinvisibletradeitemcanmakeitup,andifitcannot,capitalaccountwillbeusedtocoverdeficits.c)Finally,ifitstillnot,thegovernmentshavetodrawontheirforeignreservesassets,whichshouldbeuseasthelastresorttocoverdeficits.

B.ImplicationsforManagersa)Acountryexperiencingseriousbalanceofpaymentsdeficitsisnotlikelytoimportasmuchasitwouldifitwererunningasurplus.b)Continuingdeficitsinacountry’sBOPmaysignalfuturecontrolsontheoutflowcapitalmovements.c)Acontinuingsurplusinacountry’sBOPmayindicateastronginternationalcompetitiveposition.

Unit3BasicTheoriesofBOP

(HowaretheimbalancesofBOPadjustedwhentheyoccurinacountry?)

I.TheElasticityApproach

(弹性论）A.PriceElasticityinEconomicsi)pricequantitydemandeddemandiselasticquantitydemandedpricequantitydemandeddemandisinelastic(littlechange)ii)pricequantitysuppliedsupplyiselasticquantitysuppliedpricequantitysuppliedsupplyisinelastic(littlechange)Note:“Whendemandorsupplyiselastic,itmeansthatquantitydemandedorsuppliedwillberelativelyresponsivetothechangeinprice.”“Aninelasticdemandorsupplyindicatesthatquantityisrelativelyunresponsivetopricechanges.”B.Whenadevaluation(pricedecreasing)occursinacountry,exportsarestimulatedbecausethepriceofitsgoodsinforeigncurrencieshasbeenreduced,andimportsareretardedbecausethedomesticcostofimportedgoodshasrisen.So,theimbalanceoftradehavebeenimproved.Butitdependsonthesizeofdevaluationandthepriceelasticityofdemand.Note:thesizeofdevaluationmeanshowmuchthepricegoesdownandtheelasticityofdemandincludestwoaspects:1)foreigndemandfordomesticgoodswhenthepricechanges(specifically,thedevaluationoccurs);2)domesticdemandforforeigngoodswhenthepricechanges(specifically,thedevaluationoccurs).i)Foracountry,devaluationofthecurrenciesexportstotalpaymentsofBOPtradedeficitsimports

(littlechangeduetoinelasticdemand)

Theexportsincreasefromdevaluation(althoughthepricegoesdown,foreigndemandfordomesticgoodsincrease)isnotsomuchasimports(becauseimportsareinelasticinshortterm),so,totalpaymentsincreaseandtradebalancedeteriorates.Andinthelongrun,thereistimetolookforsubstitutesforhigherpricedgoods.thusforthelongrun,thedemandiselasticandthecountry’stradebalanceisimproved.(ThisistheJ-curveeffect.)

ii)Foracountry,thedevaluationofcurrenciesexportstotalpaymentstradesurplusesimports(decreasegreatlyduetopriceelasticity)Thedevaluationofdomesticcurrencycausemoreforeigndemandofdomesticgoodsandlessdomesticdemandforforeigngoods.a)Theincreaseofexportsandthedecreaseofimportscausedbydevaluationcouldimprovetradebalance;b)Ortheincreaseofexportsaremorethantheimports(althoughthereislittlechangeinimports),whichcouldalsoimprovetradebalance.

II.AbsorptionApproach

(吸收论)A.DefinitionofAbsorptionApproach

Itisatheoryofthebalanceoftradethatemphasizeshowdomesticspendingchangesrelativetodomesticoutput.Inthenationalincomeaccount,totaloutputsequaltotalexpenditures.Totaloutputornationalincome(Y)consistsoffourtypesofexpenditures:consumption(C),investment(I),governmentexpenditures(G),andnetexports(X-M).

So,Y=C+I+G+(X-M)HereXstandsforexportsandMstandsforimports.Y+M=C+I+G+X

（国民收入+进口=消费+投资+政府开支+出口）

totalsupplytotaldemand

（总供给)(总需求)X-M(出口-进口）=Y-(C+I+G)B=Y-A“herewedefinedomesticabsorption(A)beingequalto(C+I+G)”If,Y>AtradesurplusY<AtradedeficitsY=Aexportsequalimports,reachtradeequilibriumB.CharacteristicsofAbsorptionApproacha)吸收论是从总收入和总支出的相对关系来考察国际收支失衡的原因，而不是从相对价格关系出发。此外，吸收论是建立在凯恩斯的宏观经济学基础之上，采用一般均衡的分析方法，而非具体价格分析方法。b)就货币贬值的效应来讲，吸收论是从贬值对国民收入和支出的相对影响中考察国际收支失衡的原因。

III.MonetaryApproach

(货币论）A.Thebasicpremiseofthistheoryisthatanybalanceofpaymentsdisequilibriumistheresultofamonetarydisequilibrium,thatis,differencesexistingbetweentheamountofmoneypeoplewishtoholdandtheamountsuppliedbythemonetaryauthorities.“Inverysimpleterm,theexcessdemandformoneywouldbesatisfiedbyinflowsofmoneyfromabroad,whileontheotherhand,theexcesssupplyofmoneyiseliminatedbyoutflowsofmoneytoothercountries.”ThusthemonetaryapproachemphasizesthedeterminantsofmoneydemandandmoneysupplyalsodeterminetheBOP.Now,weuseaformulatoexplainthat:Md(货币需求）=

f(y,r)(y-收入水平，r-利率）

incomeMdMd

interestrateMdMdMs(货币供给）=D+F=D+B（于额）

domesticsupplyforeignsupply(顺差，流入）DuetoMd=Ms,Md=D+B(国际收支平衡）

B=Md(货币需求）-D（国内货币供给）If,Md>DMoneycomesinTradesurplusesMd<DMoneygoesoutTradedeficitsMd=DImports=Exports,reachtradeequilibrium.B.Policy:GovernmentsshouldcontroldomesticmoneysupplyinordertobalanceBOP.a)所有国际收支不平衡，在本质上都是货币造成的，因此国际收支不平衡都可以由国内货币政策来解决。b)国内货币政策主要指国内货币供应政策，因此松的货币政策(loosemonetarypolicy/creditpolicy)可以减少国际收支顺差；紧的货币政策(tightmonetarypolicy/creditpolicy)可以减少货币收支逆差。

Unit4.ForeignExchangeMarket

I.DefinitionsofForeignExchange&ForeignExchangeMarketA.Foreignexchangeisdefinedasthecurrencyofanothercountry.

E.g.ToaJapanese,u.s.dollarisforeignexchange,andtoanAmerican,JapaneseYenisforeignexchange.B.Theforeignexchangemarketisamarketforconvertingthecurrencyofonecountryintothatofanothercountry.Themajorparticipantsintheforeignexchangemarketarelargecommercialbanksthatoperateattwolevels-retailandinter-bank:a)attheretaillevel,theydealwithbankcustomerswhowanttobuyorsellforeignexchange;b)attheinter-banklevel,usuallythroughforeignexchangebrokers,theytradeinforeignexchangewithotherdomesticandforeignbanks,andbrokerswillreceivecommissionsfortheirservices.

II.TheFunctionsofForeignExchangeMarket

A.CurrencyConversionThepaymentsacompanyreceivesforitsexportsandincomeitreceivesfromforeigninvestmentsmaybeinforeigncurrencies.Tousethosefundsinitshomecountry,thecompanymustconvertthemtoitshomecountry’scurrency;Internationalbusinessesuseforeignexchangemarketswhentheymustpayaforeigncompanyforitsproductsorservicesinthatcountry’scurrency;Internationalbusinessesuseforeignexchangemarketswhentheyhavesparecashthattheywishtoinvestforshort-termsinmoneymarket.E.g.AUSfirmhas$10mandwantstoinvestitfor3months.TheinterestrateinUSis8%,whiletheinterestrateis12%inFrance.Hence,thecompanymaychangeits$10mintofrancsforinvestmentstoearnmoreinterestsofanother4%.A.CurrencyConversionCurrencyspeculation(short-termmovementsoffundsfromonecurrencytoanotheroneinthehopesofprofitingfromthefluctuationsinexchangerates)isanotheruseofforeignexchangemarkets.E.g.AUScompanyhas$10mtoinvestfor3months.SupposethecompanysuspectsthatUSdollarisovervaluedagainstfranc.Thatisthecompanyexpectsthevalueofthedollartodepreciateagainstfranc.Thecurrentdollar/francexchangerateis$1=FFr6,thecompanyexchangeits$10mintofrancsandreceiveFFr6om.In3months,$1=FFr5(dollardepreciateagainstfranc),thenthecompanyexchangeitsFFr60minto$12m.Thus,thecompanygetsprofits=$12m-$10m=$2m.B.InsuringAgainstForeignExchangeRiskThesecondfunctionoftheforeignexchangemarketistoprovideinsurancetoprotectagainstthepossibleadverseconsequencesofunpredictablechangeinexchangerates.Throughforwardandfuturecontracts(tofixfuturedeliveryexchangerate),theforeignexchangemarketprovidesameansofremovingtheforeignexchangerisk.

III.CharacteristicsofForeignExchangeMarketTheforeignexchangemarketisaglobalsinglemarketofbanks,brokers,andforeignexchangedealersinmanylocationsconnectedbyelectroniccommunicationsystems,suchastelephone,faxandcomputer.Theforeignexchangemarkethasbeengrowingatarapidpace,whichreflectsageneralgrowthinthevolumeofcross-bordertradeandinvestment.Theforeignexchangemarketneversleeps,anditprovides24-hourtrading,becauseofthedevelopmentofInternettechnology.Mostforeignexchangetransactionsinvolvedollars.Dealersmaytradeonecountry’scurrencyforanotherone’swiththedollarsasintermediary,becausethevolumeofinternationaltransactionsinvolvingdollarsisgreat.Itisnothardtofinddealerswhowishtotradedollarsforothercurrencies.EuroUSdollarsJapaneseYen

tradingcostisbigger

Unit5.ForeignExchangeRate

I.DefinitionofForeignExchangeRateForeignexchangeratesaresimplythepricesofforeigncurrenciesintermsofone’sown.

II.QuotationMethodsofExchangeRatesA.DirectQuotationMethodItreflectstheamountofhomecurrencythatisrequiredtobuytheforeigncurrency.AndChinausesDirectquotation.E.g.TakingRMBasthehomecurrency,$1=RMB8.3foreigncurrencyhomecurrencyB.IndirectQuotationMethodtheindirectquotationmethodisthereverse,thehomecurrencyisexpressedasaunitandthepriceisshownbythenumberofunitsofforeigncurrencythatarerequiredtopurchaseoneunitofhomecurrency.E.g.TakingRMBasthehomecurrency,RMB1=$0.1204homecurrencyforeigncurrencyC.Cross-ExchangeRates

Mostexchangeratequotationtablesexpresscurrenciesrelativetothedollar,however,insomeinstances,theexchangeratebetweentwonon-dollarcurrenciesisneeded.Thistypeofrateisknownasacross-exchangeratebecauseitreflectstheamountofoneforeigncurrencyperunitofanotherforeigncurrency.Formulaofcross-exchangerate:valueof1unitofcurrencyAinunitsofcurrencyB=valueofcurrencyAin$/valueofcurrencyBin$E.g.1Mexicanpeso=$0.071C$=$0.70valueofMexicanpesoinC$=$0.07/$0.70=C$0.10(Thatis1C$=10Mexicanpesos.)

II.TypesofExchangeRatesA.SpotExchangeRate(现汇汇率)Whentwopartiesagreetoexchangecurrencyandexecutethedealimmediately,thetransactionisreferredtoasaspotexchange.Exchangeratesgoverningsuch“onthespot”tradesarereferredtoasspotexchangerates.Thevalueofonecurrencyisdeterminedbytheinteractionbetweenthedemandandsupplyofthatcurrencyrelativetothedemandandsupplyofanothercurrency.B.ForwardExchangeRate(远期汇率)Toavoidfluctuationofspotrate,manyfirmsengageinaforwardexchange(signaforwardcontract).Aforwardexchangeoccurswhentwopartiesagreetoexchangecurrencyataspecifiedrateandexecutethatdealatsomespecificdateinthefuture.Exchangeratesgoverningsuchfuturetransactionsarereferredtoasforwardexchangerate.Takedollarsasanexample:Iftheforwardrateishigherthanthespotrate,thedollarissoldatapremium(升水)ontheforwardmarket;Iftheforwardrateislowerthanthespotrate,thedollarissoldatadiscount(贴水)ontheforwardmarket.Anexampleofusingaforwardcontractbyafirmtoavoidrisk:

AUSfirmimportslaptopsfromaJapanesesellerandsellthoselaptopsinAmerica@$2,000perunit,thecurrentspotrateis$1=¥120,A/Psin30daysare¥200,000perunit.sothecurrentpriceofeachcomputer=200,000/120=$1,667,profitsofeachcomputer=$2,000-$1,667=$333In3odays,thereare2possibilities:a)JapaneseYenappreciates,$1=¥95priceofeachcomputer=200,000/95=$2,105profitsofeachcomputer=2,000-2,105=-$105

(Inordertoavoidsuchfluctuationrisk,theUSfirmcansignaforwardcontract@$1=¥110tofixtheexchangeratein3odays.)b)JapaneseYendepreciates,$1=¥130priceofeachcomputer=200,000/130=$1,538profitsofeachcomputer=$2,000-$1,538=$462

(Withoutusingaforwardcontract,theUSfirmgainmore.)

Unit6.ForeignExchangeTransactions

I.Whatareforeignexchangetransactions?

Foreignexchangetransactionsarepurchasesandsalesofforeignexchangeswithapurposetomeettheneedsofreducingforeignexchangerisksandmakingprofits.Theyareinvolvednotonlyinmostofhugeamountofimporting,exporting,andforeigninvestmentthatgoesonthroughouttheworld,butineveryone’seconomiclife.

II.VariousForeignExchangeTransactionsA.Hedging(套期保值）involvesenteringintoacontractatthepresenttimetobuyorsellforeignexchangeataspecifiedpriceonagivenfuturedate.Itisameansofshiftingtheriskofapossiblemovementintheexchangeratetosomeoneelse.A.Hedginga.forwardtransactions:Aforwardcontractisanagreementtobuyorsellanassetatacertainfuturetimeforacertainprice.Thecontractisusuallybetween2financialinstitutionsorbetweenafinancialinstitutionandoneofitscorporateclients.(forexport&importbusinesses)Oneofthepartiestoaforwardcontractassumealongposition(多头、买入）andagreestobuytheunderlyingasset（标的资产/外汇）onacertainspecifiedfuturedateforacertainspecifiedprice.Theotherpartyassumesashortposition

(空头、卖出）andagreestoselltheassetonthesamedateforthesameprice.Thespecifiedpriceinaforwardcontractwillbereferredtoathedeliveryprice

(交割价格).

Aforwardcontractissett