- The Global Capital Market
- Why Do Capital Markets Exist?
- Brings together investors and borrowers
- Investors-people with surplus cash, individuals and non-bank financial institutions
- Borrowers-individuals, companies, governments
- Markets makers
- What Makes the GCM Attractive?
- Low risk for investors, as well as diversity of options for investment
- Volatile exchange rates can make what would otherwise be profitable, unprofitable.
- Why is it Growing?
- Advancements in technology, Deregulation (can be risky, as it can destabilize economies)
- What is a Eurocurrency?
- Any currency banked outside its country of origin. Ex. Eurodollars, euro-yen, euro-pound, euro-euro
- An important source of low-cost funds for international companies
- Began in 1950s when eastern bloc countries feared that the U.S. might seize their dollars
- In 1957, market surged again after change in laws
- What Makes the Eurocurrency Market Attractive?
- The Eurocurrency market is attractive because it is not regulated by the government
- banks can offer higher interest rates on
Eurocurrency deposits than on deposits
made in the home currency - banks can charge lower interest rates to
Eurocurrency borrowers than to those who
borrow the home currency - The spread between the Eurocurrency
deposit and lending rates is less than the
spread between the domestic deposit and
lending rates - What is the Global Bond Market?
- Bonds are an important means of
financing for many companies - the most common bond is a fixed rate which
gives investors fixed cash payoff - The global bond market grew rapidly
during the 1980s and 1990s and
continues to do so in the 20th century - What is the Global Equity Market?
- Allowing a company to sell parts of themselves.
- Buying equity/stock=buying ownership
- Offering equity/stock=selling ownership
- How Do Exchange Rates Affect the Cost of Capital?
- Growth in global capital markets has
created opportunities for firms to borrow
or invest internationally - firms can often borrow at a lower cost than in
the domestic capital market - firms must balance the cost savings against
the foreign-exchange risk associated with
borrowing in foreign currencies - What do Global Capital Markets Mean for Managers?
- Growth in capital markets offers
opportunities for firms, institutions, and
individuals to diversify their investments
and reduce risk - again though, investors must consider
foreign exchange rate risk - Capital markets are likely to continue to
integrate, providing more opportunities for
business
- The Global Capital Market
- Why Do Capital Markets Exist?
- Brings together investors and borrowers
- Investors-people with surplus cash, individuals and non-bank financial institutions
- Borrowers-individuals, companies, governments
- Markets makers
- What Makes the GCM Attractive?
- Low risk for investors, as well as diversity of options for investment
- Volatile exchange rates can make what would otherwise be profitable, unprofitable.
- Why is it Growing?
- Advancements in technology, Deregulation (can be risky, as it can destabilize economies)
- What is a Eurocurrency?
- Any currency banked outside its country of origin. Ex. Eurodollars, euro-yen, euro-pound, euro-euro
- An important source of low-cost funds for international companies
- Began in 1950s when eastern bloc countries feared that the U.S. might seize their dollars
- In 1957, market surged again after change in laws
- What Makes the Eurocurrency Market Attractive?
- The Eurocurrency market is attractive because it is not regulated by the government
- banks can offer higher interest rates on
Eurocurrency deposits than on deposits
made in the home currency - banks can charge lower interest rates to
Eurocurrency borrowers than to those who
borrow the home currency - The spread between the Eurocurrency
deposit and lending rates is less than the
spread between the domestic deposit and
lending rates - What is the Global Bond Market?
- Bonds are an important means of
financing for many companies - the most common bond is a fixed rate which
gives investors fixed cash payoff - The global bond market grew rapidly
during the 1980s and 1990s and
continues to do so in the 20th century - What is the Global Equity Market?
- Allowing a company to sell parts of themselves.
- Buying equity/stock=buying ownership
- Offering equity/stock=selling ownership
- How Do Exchange Rates Affect the Cost of Capital?
- Growth in global capital markets has
created opportunities for firms to borrow
or invest internationally - firms can often borrow at a lower cost than in
the domestic capital market - firms must balance the cost savings against
the foreign-exchange risk associated with
borrowing in foreign currencies - What do Global Capital Markets Mean for Managers?
- Growth in capital markets offers
opportunities for firms, institutions, and
individuals to diversify their investments
and reduce risk - again though, investors must consider
foreign exchange rate risk - Capital markets are likely to continue to
integrate, providing more opportunities for
business