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Questions and Answers
What is the primary purpose of a credit market, also known as a debt market?
What type of loan is provided by a group of banks to a single borrower, where the risk and amount are too large for one bank?
What is the term for the rate at which banks lend to each other, often used as a benchmark for floating rate loans?
What is the primary factor that influences the pricing of international commodities?
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What is the term for the process of identifying and assessing potential risks that could affect a company's financial performance?
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What is the primary goal of risk mitigation strategies?
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What is the term for the process of issuing equity shares to raise capital in a foreign market?
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What is the term for the risks associated with fluctuations in exchange rates?
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What is the primary purpose of a foreign loan?
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What is the term for the process of measuring and quantifying potential risks?
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Study Notes
Risk Management Strategies
- Develop strategies to mitigate or manage risks, including hedging, diversification, setting risk limits, and using financial instruments like options and futures.
- Implement systems to monitor and control risks on an ongoing basis.
- Establish a reporting framework to communicate risk information to key stakeholders.
International Commodity Markets
- World prices refer to the current prices of commodities traded internationally, serving as benchmarks for pricing worldwide.
- Influencing factors for crude oil prices include OPEC decisions, geopolitical tensions, economic growth, investment demand, industrial use, currency strength, and inflation.
- Influencing factors for precious metals include expectations, investment demand, industrial use, and currency strength.
- Influencing factors for agricultural products include weather, crop yields, food demand, trade policies, and seasonal demand.
International Payments
- International payments involve the transfer of money between entities in different countries.
- Features of international payments include cross-border nature, currency exchange, processing time, regulatory compliance, and various payment methods.
- Payment methods include bank transfers, letters of credit, bills of exchange, open account, advance payment, and credit cards.
- Legislative regulations include national regulations, international regulations, and industry-specific regulations.
International Credit Market
- A credit market is a financial sector where businesses and governments raise money by selling debt instruments to investors.
- Structure of the international credit market includes short-term credits (credits in advance and export credits) and long-term credits (syndicated loans, eurocredits, and floating rate loans).
- Trends in the development of the international credit market include growth in international lending and increased use of debt instruments.
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