《金融英語》課件-International-Finance-(II)

Unit12.GoalsofMonetaryPolicyI.WhatisMonetaryPolicy?Monetarypolicyisthecentralbank’seffortstoregulatetheeconomybymanagingthesupplyandcostofmoneyandcredit.Itusuallyhasfourmaingoals:maximumemployment,astablepricelevel,maximumandsustainableeconomicgrowth,

balanceininternationalpayments.

II.FourGoalsofMonetaryPolicya.MaximumEmploymenta)Whentheeconomyoperatesbelowitscapacity,therearesomeidleresourcesandworkers,whichresultsinunemploymentandlowerGDP.Inordertocombatsuchasituation,thecentralbankincreasemoneysupplytosimulatetheeconomyandsolvetheunemploymentproblem.b)Typesofunemploymenti)Frictionalunemployment（摩擦性失業(yè)）

involvessearchesbyworkersandfirmstofindsuitablematch-ups,isbeneficialtotheeconomy.ii)Structuralunemployment（結(jié)構(gòu)性失業(yè)）isamismatchbetweenjobrequirementsandtheskillsoravailabilityoflocalworkers.Butmonetarypolicycandolittletohandleit.c)ThegoalofemploymentFullemployment,butnotzerounemployment.Acertainnaturalrateofunemploymentisabout5to6percent.(demandforlaborequalsthesupplyoflabor)b.AStablePriceLevel

Pricestabilityisdesirablebecausearisingpricelevel(inflation)createsuncertaintyintheeconomy,anditmayhampereconomicgrowth.Ifthereisatendencyoftheriseofpricelevel,thecentralbankwilldecreasemoneysupplytoslowdowntheeconomytocurbinflation.Note:Problemscausedbyinflationtotheeconomy:(i)Inflationconveyedbythepricesofgoodsandservicesishardertointerpretwhentheoveralllevelofpriceischanging,whichcomplicatesthedecision-makingforconsumers,businessesandgovernments(ii)Inflationalsomakesithardtoplanthefuture.(iii)Inperiodsofinflation,wagesincreaselagbehindpriceincreases,thatis,inflationerodesearnings.C.MaximumandSustainableEconomicGrowth

Thegoalemphasizesthedesirabilityofarisingstandardoflivingandanexpandingeconomythatcreatesjobsforanincreasingpopulationandminimizeunemployment.“Sustainable”isimportant,forexperienceshowsthateffortstomaketheeconomygrowtoofastbreedinflation,andeventualrecession.Thegoalofsteadyeconomicgrowthiscloselyrelatedtothehighemploymentgoalbecausebusinessesaremorelikelytoinvestincapitalequipmenttoincreaseproductivitywhenunemploymentislow.(Theemployedworkersarepotentialcustomerstobuymoreofthegoods.)Inordertoachievemaximum&sustainableeconomicgrowth,thecentralbankmayloosethecreditpolicy(increasemoneysupply)toprovidemorefundstobusinessandencouragethemtoinvesttostimulatetheeconomicgrowth.D.Long-termBalanceinInternationalPaymentsa)Whenthedomesticmoneysupplyismorethanthedomesticmoneydemand,whichmeansthecapitalflowsouttobuymoreforeignimportsthanexportsormoreinvestmentsinforeigncountries.b)Whenthedomesticmoneysupplyislessthanthedomesticmoneydemand,whichmeansthecapitalflowsincausedbymoredomesticexportsthanimportsormoreforeigninvestmentsdomestically.Hence,thecentralbankshouldmonitormoneysupplytobalanceinternationalpayments.

III.ConflictsAmongGoalsMaximumemploymentversuspricestabilityisasignificantconflict.(Unemploymentmovesoppositetotheinflation.)Balanceofpaymentsversusfullemploymentandgrowthisasecondconflict.Maximumemploymentversussustainablegrowth(low-inflationgrowth)isathirdconflict.

SupplementaryMaterials:

FiscalPolicyI.Whatisfiscalpolicy?

Fiscalpolicyentailstheuseofthegovernment’staxationandexpenditurespoliciesinordertoachievemacroeconomicgoals,suchasfullemployment,rapideconomicgrowth,andstablepricelevel,etc.

II.BudgetDeficits&SurplusesA.BalancedBudget（預(yù)算平衡）

Fiscalpolicyisreflectedthroughthegovernment'sspending,taxingandborrowingpolicies.Itisoneofthemajortools,whichmightbeusedtohelppromotethemacroeconomicgoals.Governmentexpendituresmustbefinancedwitheither:(1)taxesandotherrevenuesgeneratedfromthesaleofservicesorassetsor(2)borrowing.Whengovernmentrevenuesfromtaxesandsalesofservicesareequaltogovernmentspending(includingbothpurchasesofgoodsandservices,andtransferpayments),thegovernmenthasabalancedbudget.But,thebudgetneednottobeinbalance.

B.BudgetDeficits&surpluses（預(yù)算赤字和盈余）

Abudgetdeficitispresentwhentotalgovernmentspendingexceedstotalgovernmentrevenuefromallsources.Whenabudgetdeficitispresent,thegovernmentmustborrowfundstofinancetheexcessofitsspendingrelativetorevenue.Itborrowsbyissuinginterest-bearingbondsthatbecomepartofwhatwecallnationaldebt,thetotalamountofoutstanding(未償付的）

governmentbonds.Conversely,abudgetsurplusispresentwhenthegovernment’srevenuesexceeditstotalexpenditure.Thissurpluscanbeusedbythegovernmenttoreduceitsoutstandingdebt.C.InfluencetheEconomybyGovernment’sBudget

Thegovernmentbudgetismuchmorethanamererevenueandexpenditurestatementofaprivateorganization,anditistheprimarytooloffiscalpolicy.Thegovernmentcanalteritsbudgettoinfluencethefuturedirectionoftheeconomy,changesinthesizeofthefederaldeficitorsurplusareoftenusedtogaugewhetherfiscalpolicyisaddingadditionaldemandstimulusorimposingadditionaldemandrestrainttothenationaleconomy.

a)Whenaneconomyisoperatingbelowitspotentialcapacity,inordertostimulatetheeconomy,accordingtoKeynesianism,thegovernmentshouldimplementexpansionaryfiscalpolicy.Inotherwords,thegovernmentshouldeitherincreaseitspurchasesofgoodsandservicesorcuttaxesorboth,ofcourse,thispolicywillincreasethegovernment’sbudgetdeficit.Inordertofinancetheenlargedbudgetdeficit,thegovernmentwillhavetoborrowfromeitherprivatedomesticsourcesorforeigners.

b)Whenaneconomygrowssofastthattheinflationrisessharply.Inordertocurbinflation,thegovernmentshouldcarryoutrestrictivefiscalpolicy.Thatistosay,thegovernmentreducesthepurchasesofgoodsandservicesand/orincreasetaxratetocollectmoretaxestodiminishaggregatedemanddirectlyanddampenconsumptionandinvestment.Thisleadstotheslow-downofthenationaleconomyandthereductionofinflationrate.

III.Crowding-outEffect

（擠出效應(yīng)）A.Whatiscrowding-outeffect?Whenthegovernmentborrowsfundstofinanceanenlargeddeficit,typicallyitwilldosobyissuingbonds.Issuingbondsissimplyameansofdemandingloanablefunds.Thetotaldemandforloanablefundswillincreaseasgovernmentborrowingcompeteswithprivateborrowingfortheavailablesupplyoffunds,whichisfixed.Thus,theadditionalgovernmentborrowingtofinanceanenlargeddeficitwillincreasethedemandforloanablefundsandraisetheinterestrate.Itisanadverseeffectthattendstoweakenthepotencyoffiscalpolicy.B.TheImpactofCrowding-outEffectonEconomyAstheinterestraterisescausedbycrowding-outeffectoffiscalpolicy,(1)Consumerswillreducetheirpurchasesofinterest-sensitivegoods,suchasautosandhousings.(2)Moreimportantly,ahigherinterestratewillincreasetheborrowingcostsofbusinesses.Businesseswilldelaytoborrowforfurtherinvestments(suchasplantexpansionsandheavyequipment).

Thisreductioninprivatespendingastheresultofhigherinterestrateatleastpartiallyoffsetadditionalspendingemanatingfromthedeficit.So,thecrowding-outeffectsuggeststhattheimpactofabudgetdeficitoneconomymaynotbeverypotent.So,itwillslowdowntheoverallnationaleconomy.Inanopeneconomy,thehigherinterestratewillleadtoaninflowofcapital,acurrencyappreciation,andadeclineinexports.

Unit13.TheCapitalMarketI.Whatisthecapitalmarket?

Thecapitalmarketreferstoamarketwhereencompassesanytransactioninvolvinglong-termdebtwithmorethanaone-yearmaturity.(Theword“capital”infersalong-termcommitmentonpartofthelendersandlong-termneedforthefundsonpartofborrowers.)

II.Bonds&Notes

Abondornoteusuallyreferstoamarketabledebtinstrumentwithmaturitymorethanoneyear.Noteshaveshortermaturitiesgenerallyamaximumoriginalmaturityof10yearsorless,suchasUST.N..Notesandbondsarecontractsthatstipulateaseriesoffixedpaymentsfromtheissuertotheholder.Thepaymentsareusuallysemiannualoronceayear,sometimesquarterly.Thefinalpaymentalsothefacevalueofthebondornote.Bondsandnotesmaybeofferedbyaprivatecompany,alocalorfederalgovernment,aforeignfirmofgovernment.Mostbondsandnotesaremarketable.Notes:Mostbondsornotesincludethefollowinginformation:(i)Thenameoftheissuer;(ii)Facevalue(Parvalue);(iii)Thematuritydateisthedateoffinalpayment;(iv)Couponrate;(v)Interestpaymentdate;(vi)Trustee(Atrustcompanyorlargebank.)Bondsneednothaveamaturity,theymaypayafixedamountperyearforever.Thesebondsarecalledperpetuities（永續(xù)年金）,whichhavebeensoldbythegovernment.

III.Stocksa.Allcorporatestockrepresentsanownershipinterestinacorporation,conferringontheholderanumberofimportantrightsaswellasrisks.Thereare2typesofcorporatestock:commonandpreferredstock（普通股和優(yōu)先股）.b.Commonstockrepresentsaresidualclaimagainstassetsoftheissuingfirm,entitlingtheownertoshareinthenetearningsofthefirmwhenitisprofitableandshareinthenetmarketvalue(afteralldebtsarepaid)ofthecompany’sassetsifitisliquidated（清算）.Byowningcommonstock,theinvestorissubjecttothefullrisksofownership,whichmeansthatthebusinessmayfail.Ifacompanywithoutstandingsharesofcommonstockisliquidated,thedebtsofthefirmmustbepaidtothecreditorsfirstfromanyassetsavailable.Then,thepreferredstockholderreceivetheirshareofanyremainingfunds.Atlast,whateverisleftaccruestocommonstockholderonaprodatabasis.BenefitsEnjoyedbyCommonStockholdersCommonstockholderscanelectthecompany’sboarddirectors.Theyhavepreemptiverights,whichgivethecurrentshareholderstherighttopurchaseanynewstock,convertiblebondsorpreferredstockissuedbythefirminordertomaintainaproratashareofownershipwhenrationing.Commonstockholdersmayvoteonallmattersthataffectthefirm’simportantstrategies,suchasM&Aandhiringordismissaloftheseniorexecutives,etc..c.Preferredstockoccupiesthemiddleplacebetweendebtandcommonstock,includingadvantagesanddisadvantagesofbothfirmsofraisinglong-termfunds.Preferredstockholdershaveapriorclaimoverthefirm’sassetsandearningrelativetocommonstockholders.Generally,preferredstockholdershavenovoiceintheselectionofmanagementunlessthecorporationfailstopaydividendsforastipulatedperiodoftime.Infact,thebulkofpreferredstocksusuallyhaveacallprovision（贖回條款）.Whentheinterestratesdecline,theissuingcompanymayexercisethecallprivilegebyasinkingfundprovisions（償債基金條款）

atthepricestatedintheformerformalagreementbetweenthefirmanditsshareholders.Afewpreferredstocksareconvertibleintosharesofcommonstockattheinvestor’soption.

Unit14.TheStructureof

FinancialMarketsI.Whatarethefinancialmarkets?a.Thefinancialmarketsarethemarketswheresecuritiesareexchangedasgoods.b.Financialmarketscanbeclassifiedintoseveralgroupsbasedondifferentstandards:(i)Primarymarket&Secondarymarket(basedonfunction)(ii)Internationalmarket&LocalMarket(basedonregion)(iii)Moneymarket&Capitalmarket(basedonthetermofdebtinstrument)

II.PrimaryMarket

(一級市場）A.Whatistheprimarymarket?

Theprimarymarketdealswiththesellingofnewsecuritieswhentheyarefirstintroducedbytheissuingcorporation(IPOs).B.Investmentbanksaretheintermediationofthefinancialmarketandhelptheissuingcompanytoissuethestocktothepublic.Theyadvisecorporationsinthedesignofthesecurity-whattypeofsecurityitshouldbe(commonstock,preferredstockorbond).Ifitisabond,whatrateofinterestitshouldbear,whatitsmaturityandprovisionshouldbe,etc.e.g.stock(wholesaler)stockissuingcompanyinvestmentbankpublicfundfundThisprocessiscalledunderwriting,inthiscase,thattheinvestmentbankbuysthesecuritiesfromtheissuingcompanyandthensellsthemtothepublic,makingitsprofitslikeothermerchantonthespread（差幅）

betweenitsbuyingandsellingprices.Becausetheinvestmentbankassumesasubstantialmeasureofriskinanunderwritingoperation,largeissuesofnewsecuritiesusuallywillbesyndicatedamongseveralinvestmentbanks.

C.PrivatePlacementofSecurities(私募）

Privateplacementmeanstheissuersofthesecuritiessellthemdirectlytoinvestors,withouttheunderwritingservicesofaninvestmentbank.e.g.stockissuingcorporationpublicfundsNote:Bypasstheintermediationofaninvestmentbank,therearesomebenefits,suchasunderwritingcost-saving,complianceofthetermsofsecuritieswiththeneedsofthebuyer,etc.

III.TheSecondaryMarket

(二級市場）A.

Functionofthesecondarymarket:Sincemanyoftheinitialbuyersofsecuritieswilleventuallywanttoresellthem,thereisalsothesecondarymarketforpreviouslyissuedsecuritiestotransfer.B.Registeredstockexchange&Over-the-counter

(記名股票市場和場外交易）C.RoleofthesecondarymarketTheroleofthesecondarymarketistomaketheprimarymarketpossible.Withasecondarymarket,theinitialbuyerofthesecurityknowsthatitcanberesoldtosomeoneelseinayearoftwo.Inthisfashion,thesecondarymarketinsecuritiesissaidtogiveliquidity(exit)toprimaryissues,thisliquidityisanessentialingredientinthecapitalformationprocessofacountry’seconomy.

Unit15.ToolsofMonetaryPolicyI.Inordertomonitortheeconomy,thecentralmonetaryauthoritieshavetouse2majortoolstoimplementmonetarypolicy,whichistoinfluencethemovementsofinterestrates.The2majortoolsareasfollowed:a）GeneralCreditControl

(總體信貸控制)b）SelectiveCreditControl(選擇性信貸控制)

II.GeneralCreditControlA.Definitionofgeneralcreditcontrol:

Generalcreditcontrolaffectstheentirebankingandfinancialsystemthroughreserverequirements(法定儲備金要求),

thediscountrate(貼現(xiàn)率)andopenmarketoperations(公開市場操作).B.ReserveRequirements:Itwasbelievedthattheprimarypurposeofreserverequirementswastosafeguardthepublicdepositsandavoidbankrun.(1)reserverequirementsreducedaportionofwhatwererequiredreservenowbecomesexcessreservesdepositoryinstitutionsoonconvertalloraportionofthesenewlycreatedexcessivereservesintoloansandinvestmentexpandmoneysupplylowerinterestratelowertheborrowingcostofbusinessesmorebusinessesborrowfundstoincreaseinvestmentsstimulatetheeconomy

(2)Ifallinstitutionsarefullyloanedup,withzeroexcessreserves,increaseofreserverequirementssomedepositoryinstitutionswillbeshortofrequiredlegalreservestheseinstitutionswillbeforcedtosellsecurities,cutbackonloansorborrowreservesfromotherfinancialinstitutionstomeetthereserverequirementsdecreasemoneysupplyincreaseinterestrateincreasetheborrowingcostsofbusinesseslessbusinessesborrowfundstoincreaseinvestmentsslowdowntheeconomy

C.DiscountrateistheannualpercentageinterestschargedonthoseinstitutionschoosingtoborrowfromtheFed’sdiscountwindow.(1)increasediscountrateborrowfromtheFedismorecostlythantousesomeothersourcesoffundsincreasetheborrowingcostsofcommercialbanksdecreasemoneysupplytotheoveralleconomytostirtheeconomy(2)decreasediscountrateborrowfromthefedislesscostlythantousesomeothersourcesoffundsdecreasetheborrowingcostsofcommercialbanksincreasemoneysupplytotheoveralleconomytoslowdowntheeconomyD.OpenMarketOperation

OpenmarketoperationsconsistofbuyingandsellingUSgovernmentsecuritiesbytheFedtoaffectthemoneysupply,ultimatelygeneralcreditconditions.ItisthemostflexiblepolicytoolavailabletotheFed,suitableforfine-tuningthefinancialmarketswhenthisisnecessary.(1)Fedbuyssecuritiesinflowofthefundstothebankingsystemandexpansionofitsabilitiestomakeloansandcreatedepositsincreasethemoneysupplytostirtheeconomy(2)Fedsellssecuritiesoutflowofthefundsfromthebankingsystemanddecreaseofitsabilitiestomakeloansandcreatedepositsdecreasethemoneysupplyslowdowntheeconomy

III.SelectiveCreditControlA.Moralsuasion(道義勸說)Moralsuasionreferstotheuseofpressurebycentralbanktoencouragebanksandotherlendinginstitutionstoconformwiththespiritsofitspolicies,suchastheissuanceoflettersandpublicstatementstourgebankstorestraintingrantingloansB.MarginRequirements(保證金要求)AccordingtotheSecuritiesExchangeActof1934,marginrequirementswereenactedintolaw.Thisfederallawlimitstheamountofcreditthatcouldbeusedascollateralforaloan.Fedprescribesamaximumloanvalueformarginalstocksandconvertiblebonds.Thatmaximumloanvalueisexpressedasaspecifiedpercentageofthemarketvalueofthesecuritiesatthetimetheyareusedasloancollateral.Themarginrequirementonaregulatedsecurityissimplythedifferencebetweenitsmarketvalue(100percent)andthemaximumloanvalueofthatsecurity.

(Bothgeneralcreditcontrolandselectivecreditcontrolaretoavoidfinancialcrisis.)

Unit16.EurocurrencyMarketsI.WhatistheEurocurrencyMarket?

TheEurocurrencyMarketprovidesamarketfortheexchangeoffinancialinstrumentsdenominatedincurrenciesotherthanthatthecountrywherethemarketislocated.Eurocurrenciesarethosecurrenciestradedoutsidethecountryoftheirorigin,suchasEuro-dollar,Euro-sterling,etc.The“euro”prefixisattachedtoothercurrencies,eventhoughtheEuro-marketnolongerisexclusivelyinEurope.OtherEurocurrenciesareGermanmark,SwissFranc,DutchGuilder,JapaneseYen,andFrenchFranc.TheyallsharetheEuro-dollarcharacteristicandarenationalcurrenciesdepositedoutsidetheirownborder.InadditiontoEurope,financialinstitutionsintheBahamas,CaymanIslands,Panama(taxheaven),Canada,HK,Japan,SingaporeandUSIBFs(InternationalBankingFacilities-offshorebanking)dealinEurocurrencies.(Note:OSBsrefertobankswhicharenotallowedtoconductbusinessesinthedomesticmarket,onlywithotheroff-shorebankingunitsorforeigninstitutions.)

II.ReasonsfortheExistenceofEurocurrencyMarketPoliticalConsideration-TheSocialistcountrieswerethesourceofearlydollarbalancesheldinEurope.Since1960s,thesecountriesneeddollarsfromtimetotime,butdidn’twantdepositinUSbanksforfearoffreezingduetohostilities.Thus,theydepositedthesedollarsinUKandFrenchbanks,whichbecamethefirstEurodollardeposits.RegulationConsiderations&ProfitConsiderations-Euro-marketsarealmosttotallyfreeofcontrolbynationalgovernmentandinternationalagencies,suchasinterestrateceilings(上限),reserverequirements,taxes,etc..Itreducesthecostsforbothlendersandborrowersandincreasetheprofitsofbothparties.

III.KindsofEuromarketsA.EurocurrencyMarket&EurobondMarket

TheEurocurrencymarketdealswithbankdepositsandbankcreditsofgenerallyshort-termormediumtermmaturity.TheEurobondmarketdealswithlong-termdebtinstruments-normally10-or20-yearmaturity-thatareissuedandsoldoutsidethecountryofthecurrencyinwhichtheyaredenominated.

B.InterestRatesinEurocurrencyMarketsIntheEurocurrencymarket,bankcreditsusuallycarryarateofinteresttiedbyconventiontoLIBOR.TheactualrateisoftenamarginplusLIBOR,theamountofthespreadreflectingthecreditratingoftheborrower.TheEurocurrencymarketispartlyaninter-bankmarketandpartlyamarketforloanstoCorpsandtogovernments.ManydevelopingcountriesresorttoborrowfromEuro-currencymarket,insteadofIMF,becauseofstringentconditionstothesecountriesimposedbyIMF.C.Eurobondsareunderwrittenbyaninternationalsyndicateandaresoldprincipallyincountriesotherthanthecountryofthecurrencyinwhichthebondisdenominated.TheEurobondmarketprovidesanalternativesourceoffundsfortheborrowerwhowishestoavoidregulationandexpensesoffloating(發(fā)行)thebondsinadomesticmarket.Eurobondsrequirenoregistration,andusuallybearerbonds(無記名債券)-thatisnotregisteredinanyone’sname-whichmayhaveadvantagesinavoidingtaxes.

IV.Argumentson

EurocurrencyMarket

TheEurocurrencymarketexpandedrapidlysince1960sduototheneedstoavoidnationalcontrolsbykeepingacurrencyinabankoutsideofitscountryoforigin.Now,theEurocurrencymarkethasbecomeacriticalstructuralelementforhundredsofbanksthroughouttheworldbecausethemarketrepresentsahighlyefficientresponsebyinternationalbanksbothtoinvestorsseekinghigh-yielding,safe,andliquidinvestmentsandbusinessfirmsandgovernmentslookingforlow-costfundswithahighdegreeofassuredavailability.Thereisaconcern/controversyoverEurocurrencymarketduetoillegalconducts,suchasmoneylaundry(洗錢)andillegalsourcesofdepositsfromsomecorruptedofficialsofothercountries(embezzlementsorbribes).

Unit17.MultinationalCorporations

(TransnationalCorporations)I.DefinitionofMNCsMNCsareaclusterofcorporationscontrolledbyoneheadquarterbutwithoperationsspreadovermanycountries.TheyaregenerallylargerandhavestrongR&Dcapabilities,suchasG.M.,B.P.,Hyatt,Sheraton,Motorola,Haier,Lenovo,Citibank,BankofChina,Toshiba,Toyota,CITIC,Petrochina,etc..Thegrowthofthemultinationalcorporationshasbeenattributedtoforeigndirectinvestment(FDI)whichhastakenplaceinthepast.

II.FDI&MNCsA.FDI&PortfolioInvestmentFDIisaninvestmentthatismadetoacquireacontrollinginterestinanenterpriseoperatinginaneconomy.Investor’spurposeistohaveaneffectivevoiceinthemanagementoftheenterprise.Portfolioinvestmentisaninvestmentthatismadetoacquirenon-controllinginterestinanenterpriseforobtainingcapitalgains.B.FinancingChannelsforFDICapitalmovementabroadBorrowinglocallyReinvestingforeignearningsSalenon-financialassets,suchastechnologytoforeignaffiliatesLicensingfeePaymentsformanagementfeestotheParentcompanyIII.ReasonsforGoingAbroadAcquirerawmaterialsFollowcustomerstogoabroad,suchasinternationalbank(ManhattanChasefollowsMotorolatoTianjin)Avoidtradebarriers,suchasquotasReducelaborcostsAvoidenvironmentalpollutionrestrictioninhomecountryAcquirecompetitiveadvantagesinexternalmarketstomakeupforlossesduetoseveredomesticcompetition.

IV.CharacteristicsofMNCsA.RisksFacingMNCsFinancialrisk-fluctuationofexchangerate,foreignexchangerestrictionsPoliticalrisk-unfavorablepolicies,suchasexpropriation(征用),confiscation(沒收),unfavorabletaxpolicyLegalrisk-differentlegalsystemcausesconfusion,differentinterpretationoflawsbycentralandlocalgovernmentHRmanagement-differentwayofthinking,languageBusinessrisk-competitionfromdomesticandforeignfirmsCulturalrisk-language,customsandconventionsB.MethodstoDealWithRisksLocalization-uselocalpeopletomanagelocaloperations,localfinancing,localsourceofrawmaterialsSeekinglocalpartnerstosharerisks,suchastheestablishmentofJVTransferprices-MNCscanshiftprofitstoreducetheirtotaltaxburden,inthiswayprofitsarekeptlowinhigh-taxcountriesandrelativelyhighinlow-taxcountries,thatistoavoidhigh-taxrisk.BuyingFDIinsurancetoprotectthemagainstwar,confiscation,expropriation,andforeignexchangerestriction.C.BenefitsBroughttoHostCountriesBringadvancedtechnologytohostcountriesBringcapitaltohostcountriesBringnewproductstohostcountriesBringnewideas&skillstohostcountriesPromotetheeconomicdevelopment&economicrestructuringinhostcountriesD.CostsBroughttoHostCountriesEnvironmentalpollutionExploitationoflocalpeopleToomucheconomicrelianceonMNCsandlesseconomicsovereigntyEconomicimperialism-localfirmscannotcompetewithlargerMNCsandtheywillbeannexedorgooutofbusiness

Unit18.Futures&OptionsI.Whatarethefuturesandoptions?Futuresandoptionsarederivativesassetswiththeirvaluesderivedfromunderlyingasset(原生資產(chǎn))values.Theyareusedbothtoreducefinancialrisks(thatis,tohedge)andtopurposelytakerisks(thatis,tospeculate).

II.Futures

Likeaforwardcontract,afuturescontractisanagreementbetweentwopartiestobuyorsellanassetatacertaintimeinthefutureforacertainprice.Unlikeforwardcontracts,futurescontractsarenormallytradedontheexchange.Tomaketradingpossible,theexchangespecifiescertainstandardizedfeaturesofthecontract.Asthe2partiestothecontractdonotnecessarilyknoweachother,theexchangeprovidesamechanismwhichgivesthe2parti