Explore BrainMass
Share

International Market and Financial Forcasting

This content was STOLEN from BrainMass.com - View the original, and get the solution, here!

1. Is it sufficient to understand the foundation of international money market in order to forecast financial crises?
2. Which are some of the services international banks provide their customers and the markets?
3. Which are the differences between foreign bonds and Eurobonds?
4. Do changes in the foreign exchange rate necessarily increase the foreign investment risk?
5. Has the launch of the euro affected the international diversification strategies? Explain.

© BrainMass Inc. brainmass.com September 19, 2018, 4:34 pm ad1c9bdddf - https://brainmass.com/business/international-business-risk/international-market-financial-forcasting-103391

Solution Preview

Please see the attached file.

International market and financial forcasting Please help me with these questions and list all the sources that you use.

1. Is it sufficient to understand the foundation of international money market in order to forecast financial crises?

Money market is a market which generally deals with the short term securities. According to Britannica
"Money market is a set of institutions, conventions, and practices, the aim of which is to facilitate the lending and borrowing of money on a short-term basis."
It is important to understand the foundation of international money market in order to forecast financial crisis, but it is not the only factor and there are other factors also. Most of the times crisis is due to financial sector weakness and market failure. If we take the example of Asian crisis. Specifically, the maintenance of pegged exchange rates became too expensive and forced rising deficits in Asian countries.

Loan defaults increased and governments were left with no recourse but to float their currencies, causing massive devaluation. These impact business operations dramatically because they impact the availability and cost of financial instruments, while introducing political risk, and making it more difficult to plan, organize, lead, and control business operations globally.
The Asian financial crisis was a financial crisis that started in July 1997 in Thailand, and affected currencies, stock markets, and other asset prices of several Asian countries, many part of the East Asian Tigers. Speculators did play an important role.

Other Reasons are:
1 Large private current account deficits
2 Maintenance of pegged exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors.

Thus it is an important factor. But the liberalization of domestic financial systems should proceed-or at least accompany-the opening up to foreign investors. A robust financial system supported by effective regulation and supervision of financial institutions. Adequate Risk management and tight control on speculation activities. Prudential limits on foreign currency exposure in the financial system are also essential.

money market. (2006). In Encyclopædia Britannica. Retrieved November 10, 2006, from Encyclopædia Britannica Online: http://www.britannica.com/eb/article-9109825

2. Which are some of the services international banks provide their customers and the markets?
International banks play an important role in the global financial system. . It helps in international and cross border flow of capital and credit, gives opportunities to the business, government and other institutions to access to the international markets

It acts as a intermediary between the lenders and borrowers. It arranges funds for the borrowers in any form whether it is equity, debt or hybrid instrument. It raises the finance for them for all kinds of duration whether it is short term or long term. Similarly it helps the lenders in allocating their money according to their objectives of risk and return. It helps in linking the lenders ...

Solution Summary

Almost 2000 words on how to understand the international money market, detailing concepts such as international bank services, foreign/Euro bonds, exchange rates and the effects of the Euro on diversification strategies. Graph and references included.

$2.19