Globalization of Financial Markets Essay Example | Topics and Well Written Essays - 750 words

Globalization of Financial Markets - Essay Example The impact on the stock markets themselves is difficult to predict, and could change investments and trading styles in ways that cannot be suggested from this naà ¯ve point (Sabri, 2006). For example, moving all stock exchanges from the physical to the electronic will create what is essentially one grouped exchange, meaning that any differences in the exchanges and their consequences will be eliminated (Sabri, 2006). Additionally, there may be consequences for the NASDAQ because of this conglomeration, as lower performing exchanges are incorporated into the more resilient. It is difficult to say whether this will improve the poorer performers or decrease the impact of the vital markets, but it is evident that there will be a distinct change in market performance (Arshanapalli & Doukas, 2003). The globalization of financial markets will also have inevitable consequences for the way that corporations themselves do business. If financial markets were truly globalized, there would be a need for many corporations to offer a 24-hour trading system to match the state of the exchanges, and thus many would require a greater financial output and labour input (Sachs, 1998). The globalization of financial markets could also lead to a greater amount of competition in many markets, with Eastern companies utilizing cheaper labour sources to provide cheaper services. This could cause corporations a number of problems, and introduce a need to investigate how to further improve profit margins to become competitive on a global scale. (Lahiri, Perez-Nordtvedt & Renn, 2008). Another element for business that is often discussed in the literature is a change in mind set. Along with more physical changes, an increase in globalization will require a number of changes in interaction with foreign m arkets, and understanding differences in financial systems worldwide. Lahiri, Perez-Nordtvedt & Renn (2008) suggest that there are a number of different elements that are required for the success of a corporation in the global market, including an increased appreciation of communication and cooperation, readiness to deal with temporal and cultural differences, and realizing sources of unexpected competition. These all come from an increased diversity in the market and a number of difficulties that come from dealing with previously unknown customers and investors. In conclusion, there are a number of ways in which financial markets are going to need to

Theoritical Questions Assignment Example | Topics and Well Written Essays - 1250 words

Theoritical Questions - Assignment Example The key determinants to be considered in valuing convertible bonds are, the coupon rate offered, the time when the convertibility option can be exercised and the exercise price of the stock (Choudhry, 359). A bond warrant gives the holder of the instrument the right to â€Å"call† or â€Å"put† the bond whenever it wants. Moreover, unlike a convertible bond-wherein the underlying debt is repaid in cash or an equivalent amount of company stock--the warrant contract component of a warrant-bond can be sold separately to third parties while the original investor retains the straight bond component (Choudhry, 396). Dividends are usually paid by corporations after the taxes have been deducted from the overall earnings of the company. However, in many countries, the investors may get taxed on the dividend payments that they receive. Therefore, the companies may plough back some of the earnings to avoid these taxes. Taxes decrease the cost of capital as the tax benefit comes with respect to coupon payments to bond holders. It helps to decrease the overall weighted average cost of debt (Ehrhardt and Brigham, 519). Rationality is the key towards investing in the financial markets. Most investors are more often rational in their behavior while investing than not. However, there are many instances in which irrational behavior and repeated errors in judgment have been documented or witnessed in the financial markets. Irrational behavior can be exploited by finding out the overvalued and undervalued stocks, and investing accordingly. Trade credits, Bank over Drafts and Commercial Papers are few examples of short term financing sources that can be used by companies to pay salaries, coupon payments or other miscellaneous expenses (Shim and Siegel, 133). Depending too much on some of these short term sources finance often give a wrong signal and may

Theoritical Questions Assignment Example | Topics and Well Written Essays - 1250 words

Theoritical Questions - Assignment Example The key determinants to be considered in valuing convertible bonds are, the coupon rate offered, the time when the convertibility option can be exercised and the exercise price of the stock (Choudhry, 359). A bond warrant gives the holder of the instrument the right to â€Å"call† or â€Å"put† the bond whenever it wants. Moreover, unlike a convertible bond-wherein the underlying debt is repaid in cash or an equivalent amount of company stock--the warrant contract component of a warrant-bond can be sold separately to third parties while the original investor retains the straight bond component (Choudhry, 396). Dividends are usually paid by corporations after the taxes have been deducted from the overall earnings of the company. However, in many countries, the investors may get taxed on the dividend payments that they receive. Therefore, the companies may plough back some of the earnings to avoid these taxes. Taxes decrease the cost of capital as the tax benefit comes with respect to coupon payments to bond holders. It helps to decrease the overall weighted average cost of debt (Ehrhardt and Brigham, 519). Rationality is the key towards investing in the financial markets. Most investors are more often rational in their behavior while investing than not. However, there are many instances in which irrational behavior and repeated errors in judgment have been documented or witnessed in the financial markets. Irrational behavior can be exploited by finding out the overvalued and undervalued stocks, and investing accordingly. Trade credits, Bank over Drafts and Commercial Papers are few examples of short term financing sources that can be used by companies to pay salaries, coupon payments or other miscellaneous expenses (Shim and Siegel, 133). Depending too much on some of these short term sources finance often give a wrong signal and may

Theoritical Questions Assignment Example | Topics and Well Written Essays - 1250 words

Theoritical Questions - Assignment Example The key determinants to be considered in valuing convertible bonds are, the coupon rate offered, the time when the convertibility option can be exercised and the exercise price of the stock (Choudhry, 359). A bond warrant gives the holder of the instrument the right to â€Å"call† or â€Å"put† the bond whenever it wants. Moreover, unlike a convertible bond-wherein the underlying debt is repaid in cash or an equivalent amount of company stock--the warrant contract component of a warrant-bond can be sold separately to third parties while the original investor retains the straight bond component (Choudhry, 396). Dividends are usually paid by corporations after the taxes have been deducted from the overall earnings of the company. However, in many countries, the investors may get taxed on the dividend payments that they receive. Therefore, the companies may plough back some of the earnings to avoid these taxes. Taxes decrease the cost of capital as the tax benefit comes with respect to coupon payments to bond holders. It helps to decrease the overall weighted average cost of debt (Ehrhardt and Brigham, 519). Rationality is the key towards investing in the financial markets. Most investors are more often rational in their behavior while investing than not. However, there are many instances in which irrational behavior and repeated errors in judgment have been documented or witnessed in the financial markets. Irrational behavior can be exploited by finding out the overvalued and undervalued stocks, and investing accordingly. Trade credits, Bank over Drafts and Commercial Papers are few examples of short term financing sources that can be used by companies to pay salaries, coupon payments or other miscellaneous expenses (Shim and Siegel, 133). Depending too much on some of these short term sources finance often give a wrong signal and may