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Chapter 12

Capital markets

Capital markets deal in longer-term finance, mainly via a stock
exchange, dealing mainly in:

 public sector and foreign stocks

 company securities (shares and corporate bonds)

 Eurobonds (bonds issued in a currency other than that of the
national currency of the issuing company)

4.1 International capital markets

An international financial market exists where domestic funds are supplied to a
foreign user or foreign funds are supplied to a domestic user. The currencies need
not be those of either the lender or the borrower.

e.g. a local business is looking to build a factory in a foreign country. Instead of
borrowing funds in the local currency and exchanging them for the currency of the
country of construction to make payments to the construction workers they could
borrow the foreign currency directly.

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