- INTERNATIONAL FINANCE -
QUIZ 1
NAME : ALIA MAZOUZ NAME : ADIB DINO
Student ID : F19401148 Student ID :
1. What are the risks brought about by financial globalization?
-THE RISKS BROUGHT ABOUT BY FINANCIAL GLOBALIZATON
Financial globalization has brought significant changes in the structure of national and international
capital markets, opening up new investment opportunities for lenders , but we cant deny the fact
that too many risks face this process , like per example :
-the increase of macroeconomic instability
-Monetary and fiscal policies are getting complicated by large government deficits
-The complication of financial management in emergent countries because of the flow of big
capitals that help the increase of liquidity risk, more specifically due to the volatility of emerging
market
-Risk of shocks and crises in case of non-optimization of costs and revenues
-The risk that the public sector share shrinks in front of the private sector share
-Bringing financial market imperfections to light
2. What’s the “pipeline” system for the movement of capital
around the world?
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3. What are the components that help to map the global capital
markets?
We have 3 components that help to map the global capital market .
-The First component is the Financial assets that are intangible liquid assets such as bank deposits,
bonds or stocks ,whose price results from a contractual obligation of what they represent. They are
the debt securities issued by governments
We have common types of financial assets that includes certificates, bonds, stocks and bank
deposits.
-The Second component is Institutions their job is to finance
the economy by playing the role of financial intermediary between economic agents (households,
businesses), regulate the international financial sphere (IMF, World Bank), guarantee price stability
(ECB) or stimulate economic recovery (Federal Reserve) . The common institutions of global finance
are the central banks the commercial banks , and other financial institutions.
-And finally we have Linkages as the third component . The linkage is the financial intermediation
activity that consists of channeling funds between third parties, one of which has excess resources
and the other of which is seeking funds. The common of types of linkage are :
-Title / title financial intermediation
-Monetary intermediation: deposits / securities
-Money creation: credits / deposits
4.What’s a Eurocurrency?
EURO-CURRENCY : Despite the name ,Eurocurrency does not refer to the euro;
the currency used in European countries . It actually refers to deposits denominated in foreign
currency and deposited in a bank established outside the country of origin Eurocurrencies are traded
in Eurocurrency markets. Also known as "Euro money''
5.What’s the reference interest rate used in the eurocurrency
market?
The Eurocurrency market is the market in which we sell or buy one currency against another.
The reference interest rate used to calculate the average rate at which banks make short term loans
with each other is called LIBOR (London Interbank Offered Rate) is
35 LIBOR rates are published every day, which is theoretically much more stable than an
international interbank interest rate based on a single currency
6.Why the theory of comparative advantage may not be so relevant today as compared to
the 19th century?
7.Choose one currency from your group members countries, write
it in a direct and indirect quotation forms and explain the
exchange rate regime (fixed, semi-fixed or floating) of that
country.
