Term
|
Definition
| when one country has an advantage over another country in producing more than one product (e.g. it cost the US 2units/ton of coal and 3units/ton of wheat compared to the UK with 3units/ton of coal and 4 units/ton of wheat. So there is no incentive to trade wheat and coal) |
|
|
Term
|
Definition
| traditionally defined as the purchase of assets or commodities on the market for immediate resale on anotehr in order to profit from a price discrepancy |
|
|
Term
| arbitrage pricing theory (APT) |
|
Definition
| similar to CAPM the APT is a security pricing model based risk and return and states that should fall into a certain line with slope beta and when they diverge form that line arbitrage will bring them back into the line |
|
|
Term
| Capital Asset Pricing Model (CAPM) |
|
Definition
| a model for pricing risk. The CAPM assumes that investors must be compensated for the time value of money plus systematic risk as measured by and asset's beta |
|
|
Term
| capital market imperfections |
|
Definition
| distortions in the pricing of risk, usually attributable to government regulations and asymmetries in the tax treatment of different types of investment income |
|
|
Term
|
Definition
| when nation A can produce goods with a higher relative efficiency than nation B then that nation A has a comparative advantage in producing those goods over nation B (e.g. it cost the US 2units/ton of coal and 3units/ton of wheat compared to the UK with 1unit/ton of coal and 4 units/ton of wheat. So there is an incentive to trade wheat and coal because the US hase a comparative advantage in wheat production and UK has a comparative advantage in coal production ) |
|
|
Term
|
Definition
| the constant change in the market "out with the old in with the new" (e.g. opening new stores, new businesses, businesses going bust, tearing down old buildings) |
|
|
Term
|
Definition
| situation in which increasing production leads to a less-than-proportionate increase in cost |
|
|
Term
|
Definition
| one in which new information is readily incorporated in the prices of traded securities |
|
|
Term
|
Definition
| a discipline that emphasizes the use of economic analysis to understand the basic workings of financial markets, particularly the measurement and pricing of risk and the intertemporal allocation of funds |
|
|
Term
|
Definition
| deciding where to generate funds from internal sources or from sources external to the firm at the lowest long-run cost possible |
|
|
Term
| foreign direct investment (FDI) |
|
Definition
| the acquisition abroad of physical assets such as plant and equipment with operating control residing in the parent corporation |
|
|
Term
|
Definition
| the integration of national economies through free trade |
|
|
Term
|
Definition
| managers of firms that operate in multiple companies that need specialized knowledge of the political environments in those countries, where their materials are coming from, what are their alternatives or substitutes, how they are moving their matierials and the changing relative values of those materials |
|
|
Term
| international diversification |
|
Definition
| the attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly in phase, investors can typically reduce the variability of their returns |
|
|
Term
|
Definition
| firms investing directly in the controlling power of international assets |
|
|
Term
|
Definition
| the allocation of funds over time in such a way that share holder wealth is maximized |
|
|
Term
|
Definition
| the flow of investment money between countries |
|
|
Term
|
Definition
| a market in which the prices of traded securities readily incorporate new information |
|
|
Term
| multinational corporation (MNC) |
|
Definition
| a company engaged in producing and selling goods or services in more than one country |
|
|
Term
| reverse foreign investment |
|
Definition
| investment in the home country (began in the U.S. when western european firms acquired US firms and more recently the Japanese firms have been investing in the US and Western European firms, largely in response to preceived or actual restrictions on Japanese exports to these markets.) |
|
|
Term
|
Definition
| the process that leads to equality of the risk-adjusted returns on different securities, unless market imperfections that hinder this adjustment process exist |
|
|
Term
| systematic (nondiversifiable) risk |
|
Definition
| marketwide influences that affect all assets to some extent, such as the state of the economy |
|
|
Term
|
Definition
| the shifting of gains or losses from one tax jurisdiction to another to profit from diffrences in tax rates |
|
|
Term
|
Definition
| the weighted average of a nation's export prices relative to its import prices |
|
|
Term
|
Definition
| systematic and unsyncratic risk |
|
|
Term
| unsystematic (diversafiable) risk |
|
Definition
| risks that specific to a given firm such as a strike |
|
|
Term
|
Definition
| when a floating currency gains value |
|
|
Term
|
Definition
| price at which a dealer is willing to sell foreign exhange |
|
|
Term
|
Definition
| exchange rate between 2 currencies represents the price that just balances the relative supplies of, and demands for, assets denominated in those currencies |
|
|
Term
|
Definition
| price at which a dealer is willing to buy foreign exhange |
|
|
Term
|
Definition
| A nation's official monetary authority. Its job is to use the instruments of monetary policy (sole power to create money), to achieve: price stability, low interest rates, and or a target currency value |
|
|
Term
|
Definition
| system in which there is no central bank. Instead, the currency board issues notes and coins that are convertible on demand and at a fixed rate into a foreign reserve currency. |
|
|
Term
|
Definition
| when a floating currency loses value |
|
|
Term
|
Definition
| decrease in stated par value of a pegged currency |
|
|
Term
|
Definition
| complete replacement of the local currency with the U.S. dollar |
|
|
Term
| equilibrium exchange rate |
|
Definition
| point at which supply and demand curves intersect |
|
|
Term
|
Definition
| price of one nation's currency in terms of another currency |
|
|
Term
|
Definition
| nonconveertible paper money |
|
|
Term
|
Definition
| one whose value is set primarily by market forces |
|
|
Term
| foreign exchange market intervention |
|
Definition
| official purchases and sales of foreign exhange that nations undertake through their central banks to influence their currencies |
|
|
Term
|
Definition
| price at which foreign exhange is quoted for delivery at a specified future date |
|
|
Term
| freely floating exchange rate |
|
Definition
| absence of government intervention |
|
|
Term
|
Definition
| assets' ability to be exchanged into goods or other assets |
|
|
Term
|
Definition
| currency in circulation plus bank reserves |
|
|
Term
|
Definition
| when a central bank, that lacks independence, is forced to finance the public sector deficit by buying govenrment debt with newly created money |
|
|
Term
|
Definition
| tendency to incur risks that one is protected against |
|
|
Term
|
Definition
|
|
Term
|
Definition
| sale or purchase of Treasury securities |
|
|
Term
|
Definition
| one whose value is set by the government |
|
|
Term
| real (inflation-adjusted) exchange rate |
|
Definition
| measured as the nominal (actual) exchange rate adjusted for changes in relative price levels |
|
|
Term
|
Definition
| nominal or actual interest rate minus the rate of inflation |
|
|
Term
|
Definition
| denomination currency in the exchange rate |
|
|
Term
|
Definition
|
|
Term
|
Definition
| Central bank's profit on the currency it prints |
|
|
Term
|
Definition
| price at which currencies are traded for immediate delivery (actual settlement takes place 2 days later) |
|
|
Term
|
Definition
| neutralization of impact of foreign exchange market intervention on the domestic money supply, through an open-market operation |
|
|
Term
| unsterilized intervention |
|
Definition
| monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions |
|
|
