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Preface | |
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Acknowledgments | |
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Introduction and Motivation for International Finance | |
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Why Does the Existence of Borders Matter for Finance? | |
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Key Issues in International Business Finance | |
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What Is on the International CFO's Desk? | |
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Overview of this Book | |
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International Finance: Institutional Background | |
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Money and Banking: A Brief Review | |
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The International Payment Mechanism | |
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International ("Euro") Money and Bond Markets | |
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What Is the Balance of Payments? | |
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Exchange-Rate Regimes | |
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Test Your Understanding | |
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Currency Markets | |
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About This Part | |
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Spot Markets for Foreign Currency | |
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Exchange Rates | |
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Major Markets for Foreign Exchange | |
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The Law of One Price for Spot Exchange Quotes | |
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Translating FC Figures: Nominal Rates, PPP Rates, and Deviations from PPP | |
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CFO's Summary | |
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Technical Notes | |
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Test Your Understanding | |
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Understanding Forward Exchange Rates for Currency | |
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Introduction to Forward Contracts | |
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The Relation between Exchange and Money Markets | |
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The Law of One Price and Covered Interest Parity | |
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The Market Value of an Outstanding Forward Contract | |
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CFO's Summary | |
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Appendix: Interest Rates, Returns, and Bond Yields | |
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Appendix: The Forward Forward and the Forward Rate Agreement | |
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Test Your Understanding | |
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Using Forwards for International Financial Management | |
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Practical Aspects of Forwards in Real-World Markets | |
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Using Forward Contracts (1): Arbitrage | |
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Using Forward Contracts (2): Hedging Contractual Exposure | |
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Using Forward Contracts (3): Speculation | |
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Using Forward Contracts (4): Minimizing the Impact of Market Imperfections | |
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Using the Forward Rate in Commercial, Financial, and Accounting Decisions | |
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CFO's Summary | |
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Test Your Understanding | |
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The Market for Currency Futures | |
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Handling Default Risk in Forward Markets: Old and New Tricks | |
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How Futures Contracts Differ from Forward Markets | |
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Effect of Marking to Market on Futures Prices | |
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Hedging with Futures Contracts | |
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The CFO's Conclusion: Pros and Cons of Futures Contracts Relative to Forward Contracts | |
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Appendix: Eurocurrency Futures Contracts | |
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Technical Notes | |
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Test Your Understanding | |
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Markets for Currency Swaps | |
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How the Modern Swap Came About | |
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The Fixed-for-Fixed Currency Swaps | |
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Interest-Rate Swaps | |
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Cross-Currency Swaps | |
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CFO's Summary | |
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Technical Notes | |
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Test Your Understanding | |
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Currency Options (1): Concepts and Uses | |
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An Introduction to Currency Options | |
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Institutional Aspects of Options Markets | |
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An Aside: Futures-Style Options on Futures | |
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Using Options (1): Arbitrage | |
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Using Options (2): Hedging | |
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Using Options (3): Speculation | |
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CFO's Summary | |
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Test Your Understanding | |
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Currency Options (2): Hedging and Valuation | |
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The Logic of Binomial Option Pricing: One-Period Problems | |
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Notation and Assumptions for the Multiperiod Binomial Model | |
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Stepwise Multiperiod Binomial Option Pricing | |
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Toward Black-Merton-Scholes (European Options) | |
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CFO's Summary | |
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Technical Notes | |
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Test Your Understanding | |
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Exchange Risk, Exposure, and Risk Management | |
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About This Part | |
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Do We Know What Makes Forex Markets Tick? | |
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The Behavior of Spot Exchange Rates | |
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The PPP Theory and the Behavior of the Real Exchange Rate | |
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Exchange Rates and Economic Policy Fundamentals | |
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Conclusion | |
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Technical Notes | |
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Do Forex Markets Themselves See What Is Coming? | |
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The Forward Rate as a Black-Box Predictor | |
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Forecasts by Specialists | |
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CFO's Summary | |
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Test Your Understanding | |
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(When) Should a Firm Hedge Its Exchange Risk? | |
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The Effect of Corporate Hedging May Not Just Be "Additive" | |
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FAQs about Hedging | |
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CFO's Summary | |
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Test Your Understanding | |
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Measuring Exposure to Exchange Rates | |
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The Concepts of Risk and Exposure: A Brief Survey | |
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Contractual-Exposure Hedging and Its Limits | |
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Measuring and Hedging of Operating Exposure | |
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Accounting Exposure | |
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Test Your Understanding | |
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Value-at-Risk: Quantifying Overall Net Market Risks | |
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Risk Budgeting: A Factor-Based, Linear Approach | |
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The Linear/Normal VaR Model: Potential Flaws and Corrections | |
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Historical Backtesting, Bootstrapping, Monte Carlo, and Stress Testing | |
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CFO's Summary | |
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Epilogue: The Credit Crunch Blues | |
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Test Your Understanding | |
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Managing Credit Risk in International Trade | |
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Payment Modes without Bank Participation | |
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Documentary Payment Modes with Bank Participation | |
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Other Standard Ways of Coping with Default Risk | |
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CFO's Summary | |
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Test Your Understanding | |
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Long-Term International Funding and Direct Investment | |
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About This Part | |
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International Fixed-Income Markets | |
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"Euro" Deposits and Loans | |
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International Bond and Commercial-Paper Markets | |
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How to Weigh Your Borrowing Alternatives | |
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CFO's Summary | |
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Test Your Understanding | |
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Segmentation and Integration in the World's Stock Exchanges | |
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Background Information on International Stock Markets | |
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Why Don't Exchanges Simply Merge? | |
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Can Unification Be Achieved by a Winner Taking All? | |
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CFO's Summary | |
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Test Your Understanding | |
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Why-or When-Should We Cross List Our Shares? | |
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Why Might Companies Want to List Shares Abroad? | |
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Shareholders' Likely Reaction to Diversification Opportunities | |
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Sifting through the Empirics on Cross-Listing Effects | |
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CFO's Summary | |
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Test Your Understanding | |
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Setting the Cost of International Capital | |
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The Link between Capital-Market Segmentation and the Sequencing of Discounting and Translation | |
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The Single-Country CAPM | |
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The International CAPM | |
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The CFO's Summary re Capital Budgeting | |
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Technical Notes | |
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Test Your Understanding | |
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International Taxation of Foreign Investments | |
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Forms of Foreign Activity | |
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Multiple Taxation versus Tax Neutrality | |
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International Taxation of a Branch (1): The Credit System | |
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International Taxation of a Branch (2): The Exclusion System | |
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Remittances from a Subsidiary: An Overview | |
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International Taxation of a Subsidiary (1): The Credit System | |
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International Taxation of a Subsidiary (2): The Exclusion System | |
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CFO's Summary | |
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Test Your Understanding | |
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Putting It All Together: International Capital Budgeting | |
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Domestic Capital Budgeting: A Quick Review | |
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InNPV Issue #1: How to Deal with the Implications of Nonequity Financing | |
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InNPV Issue #2: How to Deal with Exchange Rates | |
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InNPV Issue #3: How to Deal with Political Risks | |
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Issue #4: Make Sure to Include All Incremental Cash Flows | |
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Other Things to Do in Spreadsheets While You're There | |
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CFO's Summary | |
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Technical Notes | |
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Test Your Understanding | |
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Negotiating a Joint-Venture Contract: The NPV Perspective | |
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The Three-Step Approach to Joint-Venture Capital Budgeting | |
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A Framework for Profit Sharing | |
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Case I: A Simple Pro-Rata Joint Branch with Neutral Taxes and Integrated Capital Markets | |
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Case II: Valuing a Pro-Rata Joint Branch when Taxes Differ | |
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Case III: An Unbundled Joint Venture with a License Contract or a Management Contract | |
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CFO's Summary and Extensions | |
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Test Your Understanding | |
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Further Reading | |
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References | |
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Index | |