...DEVELOPMENT OF DERIVATIVE MARKETS IN EMERGING MARKET COUNTRIES1 A. Background Derivatives are commonly used for managing various risk exposures, including foreign exchange, interest rate, and credit risks. By allowing investors to unbundle and transfer these risks, derivatives contribute to a more efficient allocation of capital, in many cases reduce market and portfolio volatility, facilitate cross-border capital flows, and create more opportunities for portfolio diversification. Despite rapid growth over the past several years, Emerging Market (EM) derivatives account for only about 10 percent of the total outstanding notional values in global derivatives markets. Compared to mature markets, the ratio of outstanding notional value of derivatives to market capitalization of the underlying asset markets is fairly small in most emerging economies and is mainly focused on sovereign risks. The most common issues that challenge the development of local derivatives markets are (i) relatively underdeveloped markets for the underlying assets; (ii) lack of adequate regulatory, legal and market infrastructure, and (iii) restrictions on the use of derivatives by local and foreign entities.2 The problem of misuse of derivatives is perceived to be more acute in emerging market countries where prudential regulation, credit information infrastructure, and risk management practices are not fully developed and maybe in conflict with reasonable economic, investment or portfolio objectives. This...
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...BULLETIN CENTRAL BANK OF THE REPUBLIC OF TURKEY Issue: 8 December 2007 GOVERNOR YILMAZ’S PRESENTATION BEFORE THE COUNCIL OF MINISTERS INSIDE: 2 Reserve and Risk Management at the Central Bank of Turkey 3 Publications and News from the Central Bank of Turkey 4 At a Glance In accordance with the Law on the Central Bank of Turkey (CBT) and the principle of accountability, twice a year, the Governor provides the Council of Ministers with information on current economic outlook and the monetary policy actions. In this context, Governor Durmuş Yılmaz made a presentation before the Council of Ministers on 12 November 2007. In the first part of his presentation, Governor Yılmaz pointed out the prerequisites to achieve sustainable growth rate and single-digit nominal interest rates. The Governor gave information about inflation developments, interest rate and the exchange rate policies of the CBT, growth, employment and balance of payments developments in the second part of his presentation. The Governor stated that sustainable growth might only be achieved via establishing macroeconomic stability, continuing structural reforms and enforcing the principles of good governance. 1981 - 1989 1990 - 2001 2002 - 2006 Average Inflation 43.4 % 74.0 % 15.9 % Average Growth 4.8 % 3.0 % 7.5 % The Governor, underlining the necessity of price stability and sustainable public finance for Source : TURKSTAT, CBT macroeconomic...
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...trend. In other words an increase in the exchange rate is more likely to be followed by another increase. Investor Sentiment is based on the consensus of the market. For example if the market is bullish on the dollar, then the dollar is likely to strengthen versus other currencies. The FX market is quite different from the world equity markets in one important aspect: transparency. In equity markets, rules ensure that volume and price data are readily available to all parties… this is NOT the case in FX markets. In fact large FX dealers are able to observe factors such as: shifts in risk appetite, liquidity needs, hedging demands, and institutional rebalancing.[3] Order Flow - there is evidence of a positive correlation between spot exchange rate movements and order flows in the inter-dealer market[4] and with movements in customer order flows.[5] Three explanations for the cause of these correlations have been put forth: 1) Private information - related to the payoff from holding the currency may be contained in the order flow data. For example, future interest rates or the discount rate may be known to traders. 2) Liquidity effects – dealers charge a temporary risk premium to absorb unwanted inventory. 3) Feedback trading – the positive correlation could be...
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...MP A R Munich Personal RePEc Archive Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey Erge¸ Etem Hakan and Arslan Bengul Gulumser c ¨ ¨¨ January 2011 Online at http://mpra.ub.uni-muenchen.de/29848/ MPRA Paper No. 29848, posted 4. April 2011 06:17 UTC Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey Etem Hakan Ergeça* and Bengül Gülümser Arslanb Abstract Identifying the impact of the interest rates upon Islamic banks is key to understand the contribution of such institutions to the financial stability, designing monetary policies and devising a proper risk management applicable to these institutions. This article analyzes and investigates the impact of interest rate shock upon the deposits and loans held by the conventional and Islamic banks with particular reference to the period between December 2005 and July 2009 based on Vector Error Correction (VEC) methodology. It is theoretically expected that the Islamic banks, relying on interest-free banking, shall not be affected by the interest rates; however, in concurrence with the previous studies, the article finds that the Islamic banks in Turkey are visibly influenced by interest rates. JEL classification: G21; E52 Keywords: Interest-free banking, monetary policy I. Introduction Islamic banks1 are defined as financial institutions that rely on the principle of Profit and Loss Sharing (PLS) with the entrepreneurial partners in their relevant banking...
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...7 Balance of Payments 7.1 Global Economic Review The global economy was facing two major threats at the start of FY13: the possible demise of the Euro, and a big fiscal contraction in the US, caused by the ‘fiscal cliff’.1 However, timely policy actions were taken to address these issues. In the EU, for instance, Outright Monetary Transactions (OMTs) were launched to lower the long-term yields on sovereign bonds; there was a restructuring deal of Greek public debt; and the agreement on Single Supervisory Mechanism (SSM) was reached, to help restore confidence in the viability of the European Union.2 Similarly in the US, a partial extension of Bush tax cuts was given under the American Taxpayer Relief Act 2012 (ATRA), to eliminate the revenue side of the fiscal cliff.3 Although these policy measures were able to restore some business confidence, these were, nonetheless, insufficient to pace up the economic recovery (Figure 7.1). In the EU, growth was constrained by fiscal consolidation; deleveraging; and tight credit conditions to repair balance sheets by financial institutions and households. In the US, growth remained lackluster throughout 2012 and early 2013, despite a pick-up in credit and housing following the launch of the third round of quantitative easing (QE3) in September 2012.4 Figure 7.1: Global GDP Growth World Emerging economies 8 6 percent Advanced economies 4 2 0 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 Source: World Economic...
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...Abstract If there was only one currency in the world, there would not have been any need for foreign exchange market, foreign exchange rates or foreign exchange. But in a world of many national currencies, the foreign exchange market plays the crucial role of providing the requisite machinery for making payments across borders, transferring funds and purchasing power from one currency to another, and determining the exchange rate. The fundamental changes in foreign exchange, or FX, market began to take form in 1970′s along with the increasing internationalization of financial transactions and the change of many economies into floating exchange rate system from fixed rate system. Over years, these changes have transformed the foreign exchange market into the world’s biggest and most dynamic market today. The daily turnover of global FX market currently amounts to many trillions of dollars. The objective behind this entire project is to get the basic understanding about an Indian foreign exchange market, Forex Instruments available in India, its functioning, Forexregulators& players. Project has emphasis more on numerical data gathered through different reliable sources to comparing and analysis the performance so far by Indian foreign market with other countries and their currencies which holds a dominant position in the global foreign exchange market. As in the rest of the world, in India too, foreign exchange market is the largest financial market in existence. The...
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...Vietnam: Fiscal Strategy and Public Debt Benedict Bingham IMF Senior Representative Presentation for National Assembly Hanoi- September 15, 2010 The views expressed in this presentation are those of the author and should not be attributed to the International Monetary Fund, its Executive Board, or its management.” Outline Vietnam’s fiscal challenge Debt management issues IMF/WB Debt Sustainability Analysis 2 The fiscal challenge: how to finance investment needs? 2010 Liabilities Asset Public goods- Target - 2020 Asset Liabilities Public debt High quality High quality Public goods- Public debt Contingent liabilities Accumulated savings Public goods-Low quality Public goodsLow quality Contingent liabilities Accumulated savings Industry assets Industry assets The fiscal challenge: Constraints and Implications Three constraints: Scope for increasing aggregate size of public sector limited Scope for raising debt levels limited Contingent liabilities will need careful management Some implications: PPP may help but are unlikely to be a panacea (PPP should be driven by VfM not fiscal constraints) Raising savings (revenue), improving efficiency of investment, and equitization will all have to play a role. 4 Debt Management I: Definition of Public Debt Vietnam - Gross Public and Publicly Guaranteed Debt - 2005-2009 2005 2006 2007 2008 2009 (In percent of GDP) A. Gross public and...
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...Instructor: Bonnie Heineman Wolfe MBA 617: Import Export Management Pinarath Sinluksanathip Munkh Orgil Zorigoo Funmi Ogunwale Nasser Madini Samuel Sandeep Trang Huynh December 3, 2012 CONTENT I. Executive Summary II. Introduction III. Product background analysis IV. Egypt Overview V. Barrier to trade of Egypt VI. Market Analysis VII. Marketing Effort VIII. Logistic and Supply Chain analysis 1. Logistic Strength in Egypt: 2. Egypt Facts from Logistics Perspective 3. Creating a Supply Chain and Logistics Strategy a. Determining the Store Location and Capacity b. Transportation and Storage c. Logistic partnerships d. Logistic Enterprise and Measurement 4. Risk Management Plan for Supply Chain and Logistics IX. IKEA Distribution Process to Egypt X. General document requirement for exporting I. Executive Summary IKEA is a home furnishing company with a fully integrated supply chain, including its own industrial groups – Swedwood and Swedspan. The IKEA Group, directly or indirectly, also owns retail centers, always with an IKEA store as unique anchor tenant. The IKEA Group works in four basic areas: range strategy & product development, production, supply and retail. The parent company of the IKEA Group of Companies, INGKA Holding B.V. is owned by Stichting INGKA Foundation in the Netherlands (The case of IKEA, 2004) At IKEA, the core vision is to...
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...1. Define first aid First aid is the provision of immediate care to a victim with an injury or illness, usually effected by a lay person, and performed within a limited skill range. First aid is normally performed until the injury or illness is satisfactorily dealt with (such as in the case of small cuts, minor bruises, and blisters) or until the next level of care, such as a paramedic or doctor, arrives. 2. State the purpose of first aid a) Preserve life - This includes the life of the casualty, bystander and rescuer. b) Protect the casualty from further harm - Ensure the scene is safe. c) Provide pain relief - This could include the use of ice packs or simply applying a sling. d) Prevent the injury or illness from becoming worse - Ensure that the treatment you provide does not make the condition worse. e) Provide reassurance 3. Principles of first aid a. Explain Identification First aid is the initial assistance or care of a suddenly sick or injured person. It is the vital initial care we all feel an impulse to give as soon as possible after an accident or illness. In an emergency situation it is crucial to be able to recognise the appointed first aider. We have a range of first aider identifications such as hivis waistcoats, armbands, badges and helmet labels. First aid is an important part of everyday life, both at home, work or at play. Everyone should learn first aid and be willing to administer basic care until emergency assistance...
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...The return of financial repression CARMEN M. REINHART* Professor Peterson Institute for International Economics Periods of high indebtedness have historically been associated with a rising incidence of default or restructuring of public and private debts. Sometimes the debt restructuring is more subtle and takes the form of “financial repression”. Consistent negative real interest rates are equivalent to a tax on bond holders and, more generally, savers. In the heavily regulated financial markets of the Bretton Woods system, a variety of financial domestic and international restrictions facilitated a sharp and rapid reduction or “liquidation” of public debt from the late 1940s to the 1970s. The restrictions or regulatory measures of that era had their origins in what would now come under the heading of “macroprudential” concerns in the wake of the severe banking crises that swept many countries in the early 1930s. The surge in public debts that followed during the Great Depression and through World War II only made the case for stable and low interest rates and directed credit more compelling to policymakers. The resurgence of financial repression in the wake of the 2007-2009 financial crises alongside the surge in public debts in advanced economies is documented here. This process of financial “de-globalisation” may have only just begun. * Research associate at the National Bureau of Economic Research, Research Fellow at the Centre for Economic Policy Research. ...
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...Triennial Central Bank Survey Foreign exchange and derivatives market activity in April 2010 Preliminary results Monetary and Economic Department September 2010 Queries concerning this report should be addressed to the authors listed below: Sections I + II: Karsten von Kleist tel +41 61 280 8408 tel +41 61 280 8256 tel +41 61 280 8445 tel +41 61 280 8425 e-mail: karsten.von-kleist@bis.org e-mail: carlos.mallo@bis.org e-mail: serge.grouchko@bis.org e-mail: philippe.mesny@bis.org Sections III + IV: Carlos Mallo Section III: Section IV: Serge Grouchko Philippe Mesny Copies of publications are available from: Bank for International Settlements Communications CH-4002 Basel, Switzerland E-mail: publications@bis.org Fax: +41 61 280 9100 and +41 61 280 8100 This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2010. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISSN 1814-7348 (print) ISBN 92-9131-840-X (print) ISSN 1814-7356 (online) ISBN 92-9197-840-X (online) Contents Summary of the April 2010 Triennial Central Bank Survey ......................................................1 I. II. Background on the Triennial Central Bank Survey..........................................................2 Results of the triennial survey .........................................................................................3 1. Global foreign exchange market turnover ........
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...Sixth Edition INTERNATIONAL FINANCIAL MANAGEMENT Cheol S. Eun Bruce G. Resnick International Financial Management Sixth Edition The McGraw-Hill/Irwin Series in Finance, Insurance, and Real Estate Stephen A. Ross Franco Modigliani Professor of Finance and Economics Sloan School of Management Massachusetts Institute of Technology Consulting Editor FINANCIAL MANAGEMENT Adair Excel Applications for Corporate Finance First Edition Block, Hirt, and Danielsen Foundations of Financial Management Fourteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Tenth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise Second Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Sixth Edition Brooks FinGame Online 5.0 Bruner Case Studies in Finance: Managing for Corporate Value Creation Sixth Edition Chew The New Corporate Finance: Where Theory Meets Practice Third Edition Cornett, Adair, and Nofsinger Finance: Applications and Theory First Edition Cornett, Adair, and Nofsinger Finance: M Book First Edition DeMello Cases in Finance Second Edition Grinblatt (editor) Stephen A. Ross, Mentor: Influence through Generations Grinblatt and Titman Financial Markets and Corporate Strategy Second Edition Higgins Analysis for Financial Management Ninth Edition Kellison Theory of Interest Third Edition Kester, Ruback, and Tufano Case Problems in Finance Twelfth Edition Ross, Westerfield, and Jaffe Corporate Finance Ninth Edition...
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...Foreword I do not claim to have read the manuscript Of Changes and Transformations: Bangladesh Bank [July 2009-June 2013] highlighting changes the central bank has gone through in the past four years, but certainly had a cursory look at it. The publication of the book is of great significance at a time when the present government has just completed its four years in office. I welcome this initiative by Bangladesh Bank. I would like to thank Governor Dr. Atiur Rahman and others concerned with the project. The effort put in by the editors and their team of script writers to enrich the volume is certainly praiseworthy. I am extremely delighted to have the opportunity to write few words upon the book. Here I would like to touch upon the key aspects of the revolutionary changes that I have witnessed in Bangladesh Bank during the past four years. Firstly, digitization has taken place rapidly in the central bank and the whole banking sector was quick to follow suit. Secondly, mobile banking has been introduced and expanded significantly. This process will come its fruition with the introduction of PayPal payment system. Thirdly, revolutionary changes have taken place in CSR. Fourthly, Bangladesh Bank has achieved commendable success in financial inclusion program. Bangladesh Bank's role in involving the mass people into financial activities is undeniable. Finally, the establishment of Currency Museum is a great initiative of Bangladesh Bank. I would now like to say a few words on the...
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...Chinese Yuan Bilateral Currency Swap Agreements. Nowadays internationalization of renminbi rises as many counties try to lessen their dependence on U.S. dollar. P.B.O.C. uses different instruments to drive expansion of RMB, weakening the U.S. dollar monopoly in the basket of the world reserve currencies. By 2013, the RMB is the 8th most traded currency in the world. On 17 August 2010, PBoC issued policy to allow Central Bank, RMB offshore Clearing Banks and offshore Participating Bank to invest the excess RMB in debt securities, in onshore Inter-bank Bond Market. In October, China further open up both FDI and ODI in RMB (Pilot RMB Settlement of Outward Direct Investment) and nominated Xinjiang as the first pilot province (which in early 2011 expanded to 20 pilot areas). In June 2013, United Kingdom became the first G-7 country to set up an official currency swap line with China. As of July 2014, 25 countries have signed the RMB Bilteral Swap Ageeement with PBoC with total facilities of over ¥2.7 trillion. These agreements tell us that China decided to increase the role of RMB in the world currency market. 2007: Creation of Dim Sum bonds and offshore RMB bond market The dim sum bond market generally refers to RMB-denominated bonds issued in Hong Kong. The majority of dim sum bond are denominated in CNH, but some are linked to CNY (but paid in USD). In July 2007, dim sum bonds worth a total of US$657 million were issued for the first time by China Development Bank. These financial...
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...Performance of the fund 10 5 Hedge Funds Performance in EM scientific paper review 11 6 Hedge Funds Strategies in EM and Africa 12 6.1 Investment strategies in more developed EM. 16 6.2 Hedge Fund Strategies within Africa and Sub Saharan Africa 19 7 Risk exposures in emerging markets 23 8 Conclusion 25 References 26 Tables Table 1: Hedge Fund Strategies 1 Figures Figure 1: Emerging Markets vs. Developed Markets 2 Figure 2: Emerging Markets vs. Developed Markets GDP growth in percentage 3 Figure 3: Development of the working-age population 3 Figure 4: EM vs. US: Consumption levels 4 Figure 5: EM dept. has exceeded EM 5 Figure 6: MSCI World vs. MSCI Emerging Markets 6 Figure 7: CS Hedge Fund Index vs CS EM Hedge Fund Index 7 Figure 8: Country distribution 8 Figure 9: Industry Sectors 9 Figure 10: Equity Share Distribution 9 Figure 11: Perfomanc of the fund 10 Figure 12: EM performance 13 Figure 13: Performance of EM 14 Figure 14: Hedge Fund Strategies in Africa 17 Figure 15: Hedge Fund Strategies in Asian-pacific region 17 Figure 16: Brazil Asset Class Performance 19 Figure 17: Russia and Eastern Europe Focused Hedge Funds 19 Figure 18: African Market Sources 21 Abbreviations FX | Foreign Exchange | GDP | Gross domestic product | MACD | Moving Average...
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