HND2015国际金融《国际贸易与融资》试题

2. Main participants on market: Retail clients, Commercial banks, foreign exchange brokers, central banks.

Retail clients are those people who bought foreign exchange currency.

Commercial banks carry out the business of the retail clients and earn profit from them.

Foreign exchange brokers help the commercial banks to sell foreign exchange currency. They prefer to choose the price of currency which is valuable.

Central banks do operation to control the domestic currency exchange rate.

Two main foreign exchange markets: Spot foreign exchange market, forward foreign exchange market.

In spot foreign exchange market, the business will be done in two working days.

In forward exchange market, the contract will be done in certain price, dates. The length of contract period should be at least a month, it could be 3 month, 6 month, 9 month.

The aims of market participants are hedgers, arbitrageurs, speculators.

Hedgers aim to reduce risks of fluctuations of foreign exchange rates. Hedgers suffer the lowest risk, but they can not earn any extra profit.

Arbitrageurs aim to reduce the risk in difference between spot rate and forward rate. Arbitrageurs suffer a common risk and earn large profit.

Speculators accept the risk in exchange rate and earn higher profit.

3. There are 4 different types of payment, prepayment, open account, drafts, and letters of credit.

Prepayment means until the buyer pays the goods before, the seller will take delivery of goods. The buyer takes all risks, the seller takes the lowest risk. Because the seller might refuses to delivery goods after the payment of buyer.

Open account means the buyer complete the payment until the they received goods. The buyer takes the lowest risk and the seller takes the all risks. Because the buyer might refuse to payment after they received the goods.

Drafts are the evidence of payment, the buyer must promise the payment and then the bank will sent delivery order from the seller. This method still has risks, because the buyer still could refuse to payment on the goods.

Letters of credit means the bank takes all risks from the trading, this method is the most safety method, but the cost of trading is very high.

Prepayment and open account needs trading contract between two sides.

Drafts need delivery order from the seller, the bills of exchange, evidence of payments.

Letters of credit needs the bills of exchange, commercial invoice.

Prepayment, open account, drafts do not issuer, the letters of credit needs issuer.