Part Ⅰ金融英语

PartⅠFinancialMarketsChapter1FunctionsofFinancialMarketsChapter2MoneyMarketsChapter3CapitalMarketsChapter4ForeignExchangeMarketsChapter1FunctionsofFinancialMarkets1.1SignificanceTheword“finance”signifiescapitalinmonetaryform,thatis,intheformoffundslentorborrowed,normallyforcapitalpurposes,throughfinancialmarketsorfinancialinstitutions.Whenfinancegoesinternational,itisthenaninternationalfinance.Whatisafinancialmarket?Itisaplacewherefinancialtransactionstakeplace.Financialmarketsfacilitatethelendingoffundsfromsaverstothosewhowishtoundertakeinvestments.Thosethatwishtoborrowtofinanceinvestmentprojectssellfinancialinstrumentstosavers.Whenaninvestorpurchasesthesecuritiesissuedbyultimateborrowers(thosewhousethefundstoinvestinrealassets),capitalmarketoperationsforequities,bondswouldfalllargelyintothiscategory.Whenaninvestorchoosestoinvestintheobligationsoffinancialintermediaries,whichinturnlendthefundstothosewhoinvestinrealassets,theyareoperationsinmoneymarketfortermdepositsandloans,interbanktransactionsofsuchnature.Theprimarydistinctionbetweenthetwochannelsisthat,inthefirstcase,i.e.directfinancing,theinvestorisfaceddirectlywiththecreditriskoftheissuer,whileinthesecondcase,i.e.financingthroughfinancialintermediation,afinancialinstitution,suchasabank,interjectsitselfbetweenusersandprovidersoffunds.Anyanalysisofthesectorofmoneymarketdominatedbyfinancialintermediariesmustbeverymuchconcernedwiththesefinancialinstitutionsthemselves(theirpolicies,financialconditionsandofficialregulatoryenvironment)inadditiontothosefactorsgoverningthesuppliersandusersoffunds.Internationalfinancialtransactionsincludepurchasesandsalesofforeigncurrency,securities,goldbullion,andlendingandborrowing.Foreignexchangemarkerdealswiththeexchangesofdifferentmeansofpayment.Theseexchangesarenecessaryforinternationalcapitalflows.Astherelativevaluesamongdifferentcurrencies(theexchangerates)willfluctuateaccordingtoeconomicandpoliticalcircumstancesofthecurrenciesoftherelativecountries,internationalinvestorsorfinanciersfaceexchangerisks.Tothisend,foreignexchangemarketsprovideservices,suchasforwardtransactionsandforeigncurrencyfuturestoeliminatesuchrisks.1.2FunctionsApartfromborrowingfrombanks,afirmoranindividualcanobtainfundsinafinancialmarketintwoways.Themostcommonmethodistoissueadebtinstrument,suchasabondoramortgage,whichisacontractualagreementbytheborrowertopaytheholderoftheinstrumentfixedamountsatregularintervals(interestandprincipalpayments)untilaspecifieddate(thematuritydate),whenafinalpaymentismade.Thematurityofadebtinstrumentisshort-termifitsmaturityislessthanayearandlong-termifitsmaturityistenyearsorlong.Debtinstrumentswithamaturitybetweenoneandtenyearsaresaidtobeintermediate-term.Thesecondmethodofraisingfundsisbyissuingequities,suchascommonstock,whichareclaimtoshareinthenetincome(incomeafterexpensesandtaxes)andtheassetsofabusiness.Equitiesusuallyearnperiodicpayment(dividends)andareconsideredlong-termsecuritiesbecausetheyhavenomaturitydate.Aprimarymarketisafinancialmarketinwhichnewissuesofasecurity,suchasabondorastock,aresoldtoinitialbuyersbythecorporationorgovernmentagencyborrowingthefunds.Asecondarymarketisafinancialmarketinwhichsecuritiesthathavebeenpreviouslyissued(andarethussecondhand)canberesold.Theprimarymarketforsecuritiesisnotwellknowntothepublicbecausethesellingofsecuritiestoinitialbuyerstakeplacebehinddoors.Animportantfinancialinstrumentthatassistsintheinitialsaleofsecuritiesintheprimarymarketistheinvestmentbank.Itdoesthisbyunderwritingsecurities,thatis,itguaranteesapriceforacorporation’ssecuritiesandthensellsthemtothepublic.Whenanindividualbuysasecurityinthesecondarymarket,thepersonwhosoldthesecurityreceivesmoneyinexchangeforthesecurity,butthecorporationthatissuedthesecurityacquiresnonewfunds.Acorporationacquiresnewfundsonlywhenitssecurityarefirstsoldintheprimarymarket.Nonetheless,thesecondarymarketservestwoimportantfunctions.First,financialinstrumentsaremoreliquid.Theincreasedliquidityoftheinstrumentsmakesthemmoredesirableandthuseasierfortheissuingfirmtosellintheprimarymarket.Second,theydeterminethepriceofthesecuritythattheissuingfirmsellsintheprimarymarket.Thefirmsthatbuysecuritiesintheprimarymarketwillpaytheissuingcorporationnomorethanthepricethattheythinkthesecondarymarketwillsetforthissecurity.Thehigherthesecurity’spriceinthesecondarymarket,thehigherthepricethattheissuingfirmwillreceiveforasecurityintheprimarymarketandhencethegreatertheamountofcapitalitcanraise.Conditionsinthesecondarymarketarethereforethemostrelevanttocorporationsissuingsecurities.Itisforthisreasonthatstudiesdealingwithfinancialmarketfocusthebehaviorofsecondarymarketsratherthanprimarymarkets.Anotherwayofdistinguishingmarketisonthebasisofthematurityofthesecuritiestradedineachmarket.Themoneymarketisafinancialmarketinwhichonlyshort-termdebtinstruments(maturityoflessoneyear)aretraded;thecapitalmarketisthemarketinwhichlong-termdebt(maturityofoneyearorlonger)andequityinstrumentsaretraded.Moneymarketsecuritiesareusuallymorewidelytradedthanlong-termsecuritie