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International Market and Financial Forcasting

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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.

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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.

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See Also This Related BrainMass Solution

Seeking Financial Altitude in a Cloudy Sky...

Just need a base line to get started and information articles. The questions are at the end below and attached.

-------------------

Forecasting: Seeking Financial Altitude in a Cloudy Sky

LEAD STORY-DATELINE: The Australian Financial Review, May 17, 2002.

Qantas has a lot riding on remaining dominant and profitable in the Australian
domestic market for air travel and freight, as well as remaining profitable
on its overseas routes-particularly the "Kangaroo" route to and from
the United Kingdom. It has reported expansion plans involving $A13 billion that
it intends to spend over a ten-year period on a range of upgrades to planes
and lounge facilities, as well as on new aircraft.

The marketing environment for airlines is volatile at the best of times, and
from money-man Warren Buffet's (Berkshire Hathaway) viewpoint, nobody ever made
money from investing in an airline over the long term. However, Qantas CEO Geoff
Dixon aims to prove this wrong. How can this be done in such a volatile market?
How can Qantas continue to generate revenue and earnings equal to or greater than
those in 2000, 2001, and as forecast for 2002?

The domestic market is relatively stable since the final demise of Ansett Airlines
in April 2002. The new competitor, Virgin Blue, is a single-class operator and
as anxious as Qantas to keep the public flying with realistically low pricing,
but also wants to ensure profitability and ultimately, survival. However, Virgin
Blue is not backward in making its views heard by the Australian Competition
and Consumer Commission (ACCC) when it believes that its larger competitor has
overstepped the (legal) mark, and possibly engaged in unfair practices (under
the Trade Practices Act) that might hurt its market position and financial position.

The international market is far more volatile, particularly since the terrorist
activities of September 11, 2001. Qantas and its part-owner British Airways
(BA) have maintained a strong alliance in the face of turmoil in the aviation
industry generally. While BA has become cash strapped, Qantas has remained cash
positive and profitable. How has this been done? Qantas's strategy is to remain
flexible-not only by ensuring that its fleet can operate as a single-class carrier
or be quickly converted to a mix of business and economy class, but also by
cutting costs. More importantly it plans to ensure that its non-airline businesses
stay profitable. These businesses accounted for 30 percent of the company's
profits in the six months to December 2001, and include Qantas Flight Catering
Ltd, Qantas Holidays, Qantas Defence Systems, Australian Air Express, Qantas
Business Travel and also includes its frequent flyer programs and co-branded
credit card operations.

It can be seen from the Qantas company structure that it has remained an integrated
airline, while many of its international rivals have sold off such operations
when seeking capital to either build their airline business, or to stay profitable,
or simply to remain airborne.

LEAD STORY-DATELINE: The Australian Financial Review, May 17, 2002.

Qantas has a lot riding on remaining dominant and profitable in the Australian
domestic market for air travel and freight, as well as remaining profitable
on its overseas routes-particularly the "Kangaroo" route to and from
the United Kingdom. It has reported expansion plans involving $A13 billion that
it intends to spend over a ten-year period on a range of upgrades to planes
and lounge facilities, as well as on new aircraft.

The marketing environment for airlines is volatile at the best of times, and
from money-man Warren Buffet's (Berkshire Hathaway) viewpoint, nobody ever made
money from investing in an airline over the long term. However, Qantas CEO Geoff
Dixon aims to prove this wrong. How can this be done in such a volatile market?
How can Qantas continue to generate revenue and earnings equal to or greater than
those in 2000, 2001, and as forecast for 2002?

The domestic market is relatively stable since the final demise of Ansett Airlines
in April 2002. The new competitor, Virgin Blue, is a single-class operator and
as anxious as Qantas to keep the public flying with realistically low pricing,
but also wants to ensure profitability and ultimately, survival. However, Virgin
Blue is not backward in making its views heard by the Australian Competition
and Consumer Commission (ACCC) when it believes that its larger competitor has
overstepped the (legal) mark, and possibly engaged in unfair practices (under
the Trade Practices Act) that might hurt its market position and financial position.

The international market is far more volatile, particularly since the terrorist
activities of September 11, 2001. Qantas and its part-owner British Airways
(BA) have maintained a strong alliance in the face of turmoil in the aviation
industry generally. While BA has become cash strapped, Qantas has remained cash
positive and profitable. How has this been done? Qantas's strategy is to remain
flexible-not only by ensuring that its fleet can operate as a single-class carrier
or be quickly converted to a mix of business and economy class, but also by
cutting costs. More importantly it plans to ensure that its non-airline businesses
stay profitable. These businesses accounted for 30 percent of the company's
profits in the six months to December 2001, and include Qantas Flight Catering
Ltd, Qantas Holidays, Qantas Defence Systems, Australian Air Express, Qantas
Business Travel and also includes its frequent flyer programs and co-branded
credit card operations.

It can be seen from the Qantas company structure that it has remained an integrated
airline, while many of its international rivals have sold off such operations
when seeking capital to either build their airline business, or to stay profitable,
or simply to remain airborne.
In this section, we consider questions concerning strategy development and
demand forecasting in volatile marketing environments:

-------------------------

1. Provide a definition of market demand.
2. How are market demand, market potential and sales forecasting related to each other?
3. The fertility rate in Australia is declining and immigration levels are
not yet set at levels that might lead to population growth (at the time of
writing). Might this influence the revenue and earnings that Qantas could
achieve in the future?
4. How might Qantas employ such a tool as the Ansoff product/market expansion
grid in developing its growth strategies? (Click here for more details about the grid.)

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