Global Capital Market

This set of flashcards covers the key concepts from the Global Capital Market lecture, focusing on benefits, risks, market functions, and specific markets like Eurocurrency and Eurobonds.

What are the benefits of the global capital market from the borrower's perspective?

Lower cost of capital compared to domestic capital markets.

What do equity loans entail?

Equity loans are made when a corporation sells stock to investors.

What is the primary perspective of investors in the global capital market?

Portfolio diversification through a wider range of investment opportunities.

What role do market makers serve in the global capital market?

Market makers connect investors and borrowers, either directly or indirectly.

What is Eurocurrency, and why is it important?

Eurocurrency, such as Eurodollars, accounts for a large part of international finance and is a relatively low-cost source of funding for businesses.

What are the risks associated with the globalization of capital markets?

Increased vulnerability to speculative capital flows can destabilize national economies.

How can foreign exchange risks affect the cost of capital?

Adverse movements in foreign exchange rates can substantially increase the cost of foreign currency loans.

What is Martin Feldstein's distinction between 'hot money' and 'patient money'?

'Hot money' refers to short-term capital, while 'patient money' supports long-term cross-border capital flows.

What impact did the financial crisis of 2008-2009 have on deregulation?

It caused experts to question whether deregulation had gone too far and highlighted the need for new regulations in financial services.

What advantage does the Eurobond market offer to issuers?

An absence of regulatory interference and less stringent disclosure requirements compared to domestic markets.