Essays on European Central Bank

The development of financial markets in a country does increase its productivity. A financial market is a venue for the transfer of funds from those with excess capital or funds to those who are in need of the same. A developing financial market may help an economy prosper and become more productive in several ways. In the capital markets, enterprises wishing to secure more funds for operations and expansion can obtain funds by holding an initial public offering or an “IPO”, thus becoming a public organization. It is then bound by the designated financial and commercial laws of the ...

Question 1

Financial markets are the channels dealing with funding of money in case of a deficit on the borrowers in the enterprise by direct financing such as selling them as securities. Central bank regulations and government intervention help in the control of monetary policy and interest rates in the economic markets. Having full control over monetary policies will ensure that inflation rates are reduced. As discussed in class, a reduction in monetary policy sinceJanuary 2016 had a great impact on the euro zone currency as investors in the foreign market increased their purchases due to the currency protection not to ...

Finance

Treasury Risk Management (a) (a.1)

The forward rate is:

Forward rate = 1.4010 + 0.095 Forward rate = 1.4105 Payment in six months: 8.5 million euros. Payment in GBP = 6,03 million GBP (a.2) 8.5 million EUR are 85000 options paid: Call: 1.2 * 85000 = 102000 GBP in paid premium Put: 1 * 85000 = 85000 GBP in paid premium Both strike options are different from the two values of currency exchange 1.37 EUR/GBP and 1.43 EUR/GBP. The results will be: 8,5 million EUR / 1.42 = 5,985,915.49 GBP – 102000 GBP = 5,883,915.00 GBP 8,5 million EUR / 1.4180 = 5,994,358.00 GBP – 85000 GBP = ...