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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 | |