国际财务管理课后习题答案chapter51/121/12IM-1CHAPTER5THEMARKETFORFOREIGNEXCHANGESUGGESTEDANSWERSANDSOLUTIONSTOEND-OF-CHAPTERQUESTIONSANDPROBLEMSQUESTIONS1.Giveafulldefinitionofthemarketforforeignexchange.Answer:Broadlydefined,theforeignexchange(FX)marketencompassestheconversionofpurchasingpowerfromonecurrencyintoanother,bankdepositsofforeigncurrency,theextensionofcreditdenominatedinaforeigncurrency,foreigntradefinancing,andtradinginforeigncurrencyoptionsandfuturescontracts.2.Whatisthedifferencebetweentheretailorclientmarketandthewholesaleorinterbankmarketforforeignexchange?Answer:Themarketforforeignexchangecanbeviewedasatwo-tiermarket.Onetieristhewholesaleorinterbankmarketandtheothertieristheretailorclientmarket.InternationalbanksprovidethecoreoftheFXmarket.Theystandwillingtobuyorsellforeigncurrencyfortheirownaccount.Theseinternationalbanksservetheirretailclients,corporationsorindividuals,inconductingforeigncommerceormakinginternationalinvestmentinfinancialassetsthatrequiresforeignexchange.Retailtransactionsaccountforonlyabout14percentofFXtrades.Theother86percentisinterbanktradesbetweeninternationalbanks,ornon-bankdealerslargeenoughtotransactintheinterbankmarket.3.Whoarethemarketparticipantsintheforeignexchangemarket?Answer:ThemarketparticipantsthatcomprisetheFXmarketcanbecategorizedintofivegroups:internationalbanks,bankcustomers,non-bankdealers,FXbrokers,andcentralbanks.InternationalbanksprovidethecoreoftheFXmarket.Approximately100to200banksworldwidemakeamarketinforeignexchange,i.e.,theystandwillingtobuyorsellforeigncurrencyfortheirownaccount.Theseinternationalbanksservetheirretailclients,thebankcustomers,inconductingforeigncommerceormakinginternationalinvestmentinfinancialassetsthatrequiresforeignexchange.Non-bankdealersarelargenon-bankfinancialinstitutions,suchasinvestmentbanks,mutualfunds,pensionfunds,andhedgefunds,whosesizeandfrequencyoftradesmakeitcost-effectivetoestablishtheirowndealingroomstotradedirectlyintheinterbankmarketfortheirforeignexchangeneeds.国际财务管理课后习题答案chapter52/122/12IM-2Mostinterbanktradesarespeculativeorarbitragetransactionswheremarketparticipantsattempttocorrectlyjudgethefuturedirectionofpricemovementsinonecurrencyversusanotherorattempttoprofitfromtemporarypricediscrepanciesincurrenciesbetweencompetingdealers.FXbrokersmatchdealerorderstobuyandsellcurrenciesforafee,butdonottakeapositionthemselves.Interbanktradersuseabrokerprimarilytodisseminateasquicklyaspossibleacurrencyquotetomanyotherdealers.Centralbankssometimesinterveneintheforeignexchangemarketinanattempttoinfluencethepriceofitscurrencyagainstthatofamajortradingpartner,oracountrythatit“fixes”or“pegs”itscurrencyagainst.Interventionistheprocessofusingforeigncurrencyreservestobuyone’sowncurrencyinordertodecreaseitssupplyandthusincreaseitsvalueintheforeignexchangemarket,oralternatively,sellingone’sowncurrencyforforeigncurrencyinordertoincreaseitssupplyandloweritsprice.4.Howareforeignexchangetransactionsbetweeninternationalbankssettled?Answer:Theinterbankmarketisanetworkofcorrespondentbankingrelationships,withlargecommercialbanksmaintainingdemanddepositaccountswithoneanother,calledcorrespondentbankaccounts.Thecorrespondentbankaccountnetworkallowsfortheefficientfunctioningoftheforeignexchangemarket.Asanexampleofhowthenetworkofcorrespondentbankaccountsfacilitiesinternationalforeign...
