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International Finance

Distinguish between Business risk and Financial risk

Distinguish between Business risk and Financial risk

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Distinguish between Business risk and Financial risk

Distinguish between Business risk and Financial risk read more

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Bond Pricing Theorems

Bond Pricing Theorems

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Bond Pricing Theorems

Bond Pricing Theorems. Being fixed income securities bonds are issued with a fixed rate of interest known as coupon rate. The calculation of coupon rate is based on the face value and maturity of the bond. read more

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Warrants vs Convertible Bonds – Meaning & Differences

Warrants and Convertible Bonds

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Warrants vs Convertible Bonds

Warrants

Warrants are financial assets giving the holder the right but not obligation to buy shares of common stocks directly from the issuing authority at a fixed price for a given period of time. Each warrant specifies the number of shares of common stock a holder can purchase at the exercise price at the expiration date. Some features of warrants are same as those of call options. From the view point of the holders call options and warrants like the same. But still there exists a significant difference in contractual features of them. Say warrants have long maturity period. Some warrants are same as the perpetuals having no expiration date at all. The basic difference between call options and warrants is that call options are issued by individuals and warrants are issued by the firms. When a warrant is exercised, a firm must issue new shares of stock. Each time a warrant is exercised, the number of shares outstanding increases. In case of call options is not necessary i.e., when a call option is exercised, there is no change in the number of shares outstanding. Warrants vs Convertible Bonds. read more

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Futures vs Forward Contracts

Futures vs Forward Contracts

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Futures vs Forward Contracts

Futures Contract

Futures Contracts commonly known as futures are also financial derivatives constituting instrument for hedging the risk in the financial markets due to the price fluctuation of the assets. The features of a futures contract are the same as that of a forward contract. However, these are two different instruments used for risk management. Futures contracts have been designed to remove the disadvantages of forward contracts. A futures contract can be defined as an agreement between two parties for buying or selling an asset at a certain time in future at a certain price. Like commodities, financial assets form the underlying assets in futures contracts. So, Stocks, bonds etc. are the financial assets underlying futures contracts. A futures contract on financial assets is known as financial future. The fundamental idea regarding futures contracts is that for hedging a portfolio with a higher volatility than the market index, more futures contracts may be required to bring about an effective and efficient hedge. Futures vs Forward Contracts. read more

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Different Exchange Rate Systems with Pros and Cons

Different Exchange Rate Systems

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Different Exchange Rate Systems

Different Exchange Rate Systems. Conversion rate of one currency into another. This rate depends on the local demand for foreign currencies and their local supply, country’s trade balance, strength of its economy, and other such factors.
In finance, an exchange rate (also known as a foreign-exchange rate, forex rate, FX rate or Agio) between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency. read more

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