Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
| American Options | A call or put option that can be exercised on or before its expiration date.
(See Refer to page 732, 829)
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| Belgian Dentist | Stereotype of the traditional Eurobond investor as a professional who must report income, has a disdain for tax authorities, and likes to invest in foreign currencies.
(See Refer to page 709)
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| Counterparty | Second borrower in currency swap. Counterparty borrows funds in currency desired by principal.
(See Refer to page 731)
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| Cross-Rate | The implicit exchange rate between two currencies (usually non-U.S.) quoted in some third currency (usually the U.S. dollar).
(See Refer to page 709)
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| Eurobanks | Banks that make loans and accept deposits in foreign currencies.
(See Refer to page 729)
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| Eurobond | International bonds issued in multiple countries but denominated in a single currency (usually the issuer's currency).
(See Refer to page 709)
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| Eurocurrency | Money deposited in a financial centre outside of the country whose currency is involved.
(See Refer to page 709)
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| Exchange Rate | The price of one country's currency expressed in another country's currency.
(See Refer to page 711)
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| Exchange Rate Risk | The risk related to having international operations in a world where relative currency values vary.
(See Refer to page 730)
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| Export Development Corporation (EDC) | Federal Crown corporation that promotes Canadian exports by making loans to foreign purchasers.
(See Refer to page 710)
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| Foreign Bonds | International bonds issued in a single country, usually denominated in that country's currency.
(See Refer to page 710)
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| Foreign Exchange Market | The market where one country's currency is traded for another's.
(See Refer to page 710)
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| Forward Exchange Rate | The agreed-on exchange rate to be used in a forward trade.
(See Refer to page 715)
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| Forward Trade | Agreement to exchange currency at some time in the future.
(See Refer to page 715)
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| Gilts | British and Irish government securities, including issues of local British authorities and some overseas public-sector offerings.
(See Refer to page 710)
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| Interest Rate Parity (IRP) | The condition stating that the interest rate differential between two countries is equal to the difference between the forward exchange rate and the spot exchange rate.
(See Refer to page 721)
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| International Fisher Effect (IFE) | The theory that real interest rates are equal across countries.
(See Refer to page 723)
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| London Interbank Offer Rate (LIBOR) | The rate most international banks charge one another for overnight Eurodollar loans.
(See Refer to page 710)
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| Note Issuance Facility (NIF) | Large borrowers issue notes up to one year in maturity in the Euromarket. Banks underwrite or sell notes.
(See Refer to page 729)
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| Political Risk | Risk related to changes in value that arise because of political actions.
(See Refer to page 735)
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| Purchasing Power Parity (PPP) | The idea that the exchange rate adjusts to keep purchasing power constant among currencies.
(See Refer to page 716)
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| Spot Exchange Rate | The exchange rate on a spot trade.
(See Refer to page 715)
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| Spot Trade | An agreement to trade currencies based on the exchange rate today for settlement in two days.
(See Refer to page 715)
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| Swaps | Agreements to exchange two securities or currencies.
(See Refer to page 710)
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| Unbiased Forward Rates (UFR) | The condition stating that the current forward rate is an unbiased predictor of the future exchange rate.
(See Refer to page 722)
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| Uncovered Interest Parity (UIP) | The condition stating that the expected percentage change in the exchange rate is equal to the difference in interest rates.
(See Refer to page 722)
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2002 McGraw-Hill Higher Education