Page 97 - BA1 Integrated Workbook STUDENT 2018

The financial context of business II: International aspects

International Money Markets

1.1 International capital markets

The funds available on international capital markets fall into three broad categories:

(1) short-term capital (Eurocurrency) borrowed mainly for the purposes of
working capital;

(2) medium-term capital (Eurocredit) borrowed for working capital and
investment purposes;

(3) long-term capital (Eurobonds) borrowed for investment purposes and
for financing mergers and acquisitions.

1.2 Foreign exchange markets

Why we need FX markets

(1) the finance of international trade;

(2) companies holding and managing a portfolio of currencies as part of their
financial asset management function;

(3) financial institutions dealing in foreign exchange on behalf of their customers
and in order to benefit from changes in exchange rates.

(4) to manage risks associated with exchange rate movements

Trading can be

 Spot

 Forward

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