INTERNATIONAL FINANCIAL INSTRUMENTS

TYPES OF INTERNATIONAL FINANCIAL INSTRUMENTS

1. INTERNATIONAL FINANCIAL INSTRUMENTS

2. International Financial Instruments Meaning: Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership interest in an entity (share), or a contractual right to receive or deliver cash (bond).

3. Types Of International Financial Instruments International Bonds Short Term And Medium Term Instruments Others

4. INTERNATIONAL BONDS

5. FOREIGN BONDS & EURO BONDS Foreign bonds Foreign bonds are underwritten by the underwriters of the country where they are issued. Maturity based on the need of investors of a particular country. Foreign bonds are subjected to government regulations in the country where they are issued. Euro bonds Euro bonds are free from rules and regulations. They are tailored to the needs of the multinational investors.

6. GLOBAL & STRAIGHT BONDS Global Bonds Bonds that can be offered within the euro market and several other markets simultaneously is called a global bond. Global bonds are first issued in the year 1989 by WORLDBNK. It dominated by 7 country’s currency Straight Bonds These are the conventional type of bonds They bear a fixed interest rate, and this rate is called COUPON RATE . It is a Traditional bond.

7. CONVERTIBLE & COCKTAIL BONDS Convertible Bonds Convertible bonds are the bonds which can be converted into equity shares. The price of the convertible bonds depends upon the price of the equity shares. The market value of these bonds is very high . Cocktail Bonds Denominated in a mixture of currencies. Represent a weighted average of 5 currencies. Investors get currency diversification risk. Depreciation offset by appreciation of other.

8. FLOATING RATES NOTES Floating Rate Notes FRN’S were first issued in the year 1970. They do not carry any fixed rate of interest. The rate of interest is estimated as premium or discount with reference to LIBOR. (London Interbank Offered Rate) The interest rates are periodically revised once in 3 months and 6 months

9. SHORT TERM AND MEDIUM TERM INSTRUMENTS

10. EURO NOTES AND MID TERM EURO NOTES Euro Notes Euro notes are short-term notes underwritten by a group of commercial banks called as FACILITY. Denominated in any currency other than the currency of the country where they are issued. Documentation facilities are minimum. Represent Low cost funding route. Investor too prefer them in view of short maturity. Mid-Term Euro Notes A mid-term Euro note, is a flexible debt instrument that is traded and issued outside of the United States and Canada. These instruments require fixed payments and are directly issued to the market with maturities that are less than five years It carries fixed rate of interest.

11. EURO COMMERCIAL PAPER Euro Commercial Paper Euro Commercial Paper is an unsecured, short-term debt instrument that is denominated in a currency differing from the domestic currency of the market where it is issued. A short-term, debt instrument. Corporations issue euro commercial papers in order to tap into the international money markets for their financing.

12. OTHERS

13. AMERICAN DEPOSITORY RECEIPTS American Depository Receipts An American depositary receipt is a negotiable security that represents securities of a company that trades in the U.S. financial markets. Represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. ADRs carry prices in US dollars, pay dividends in US dollars, And can be traded like the shares of US-based companies. Examples : JPMorgan, Citibank, Deutsche Bank, Bank of New York Mellon

14. GLOBAL DEPOSITORY RECEIPTS Global Depository Receipts A global depositary receipt or GDR is a bank certificate issued in more than one country for shares in a foreign company. Very similar to an  American depositary receipt. Private markets use GDR’S to raise capital denominated either in U.S. Dollar or Euro’s. When private markets attempt to obtain Euros instead of US dollars we call them GDR’S.

15. ADR VS GDR BASIS ADR GDR ISSUED IN United States of America European Countries PURPOSE Helps to acquire resources in US Helps to acquire resources in different countries OBJECTIVE Investment in different countries Investment in foreign countries RESTRICTIONS The USA Other Countries LISTING OF STOCK USA Other Countries

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