International investing is something that many investors find that they can benefit from for many reasons. Two of the main reasons why investors choose to invest in foreign markets are growth and diversification. Growth allows investors the potential to take advantage of new opportunities in foreign emerging markets. International markets can potentially offer opportunities that might not be available in the United States. Diversification allows investors to spread out their risk to different markets and foreign companies other than those just in the United States allowing them to potentially create larger returns on their investment as well as reducing risks. (U.S. Securities and Exchange Commission, 2012) While investing internationally can be a very lucrative and rewarding decision, there are also extra risks involved with investing internationally. One of the main risks that international investors encounter is foreign exchange risk also known as currency risk. Currency risk is a financial risk that is created by contact with unforeseen changes in the exchange rate between two currencies. These changes can cause unpredictable gains or losses when profits from investments are converted from a foreign currency to the United Stated dollar. There are precautions that can be taken by investors to potentially lower their risk of currency value fluctuations and other risk factors that are present in international investing. (Gibley, 2012) Why Invest Internationally? Some investors are wary about the process of investing internationally, carrying the concept that it is always to precarious and complex. While there are risks involved with international investing, there are also very beneficial and profitable reasons for doing so. Ev... ... middle of paper ... ... M. (2012, July 24). Why Invest Internationally? Schwab.com. Retrieved February 14, 2014 from http://schwab.com Parto, C. (2012, March 8). Protect Your Current Investments from Currency risk. Investopedia.com. Retrieved February 14, 2014 from http://www.investopedia.com/articles/forex/08/invest-forex.asp Kuiper, J. (2011, May 18). What Is Currency Risk? About.com. Retrieved February 14, 2014 from http://internationalinvest.about.com/od/foreigncurrencies/what-is-currency-risk.htm Nguyen, J. (2011, September 8). The 3 Biggest Risks Faced By International Investors. Investopedia.com. Retrieved February 25, 2014 from http://www.investopedia.com/articles/basics/11/biggest-risks-investors-face.htm U.S. Securities and Exchange Commission. (2012, August 14). International Investing. SEC.gov. Retrieved February 25, 2014 from https://www.sec.gov/investor/pubs/ininvest.htm
The purpose of this paper is to provide a summary of the article called “Can We Keep Our Promises?” by Robert D. Arnott, and to help better understand the three key risks facing each investor.
The large-scale multinational financial giants are probably represented by the renowned investment banks such as Goldman Sachs, UBS, D...
Hill, C., Wee, C. and Udayasankar, K. 2012.International Business:An Asian Perspective. 8th ed. Singapore: McGraw-Hill.
The expanding global market has created both staggering wealth for some and the promise of it for others. Business is more competitive than ever before, and every business, financial or product-based, regardless of size or international presence is obligated to operate as efficiently as possible. A major factor in that efficient operation is to take advantage of every opportunity to maximize profits. Many multinational organizations have used derivatives for years in financial risk management activities. These same actions that can protect multinational organizations against interest rate futures and currency fluctuations can be used to create profits for those same organizations.
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
With the theoretical part on FX exposure serving as background, this part focuses at some more practical issues that arise in terms of assessing the exposure. In order to manage the risk, a
Investing or venturing into the international market involves critical analysis of the internal and external environment in which the company operates. Usually, a company will decide to venture internationally due to a saturated market or fierce competition in the current country of operation. The demand for a company’s products may have diminished as a result of an economic crisis thus the company will target a foreign market to sustain its sales. In other words, the firms expand internationally to seek new customers for its products. For example, the current Euro zone crisis led to low demand in Europe and many companies extended their businesses to emerging markets where demand was high. A company may also venture in the international market to enhance the cost-effectiveness of its operations especially for manufacturing companies that will benefit from low costs of production in developing world. Global expansion is a long term project as it involves demanding logistics to be successful. Thorough research must be undertaken to ensure that the expansion will create value for share...
International business can be quite challenging and unsuccessful, if multinational companies do not look at the environment where they want to explore and invest. There are different aspects and market dimensions that can tell decisions makers if it’s convenient to invest in different markets. According to Global Edge (2014), “Global marketing has become more and more important over the years with the increasing trend of internationalization. Faced with too many choices, marketers have the challenge of determining which international markets to enter” (para. 1). The market potential indicator (MPI) is an index that can help marketers understand statistically how consumers behave and use these numbers to analyze potential countries and its risks. Based on the MPI
see, foreign exchange hedging was an area of key importance for AIFS given the level of currency
Hill, C. (2008). International Business: Competing in the Global Marketplace (7th ed.). New York: McGraw-Hill.
Cavallaro, M. (2011, June 7). Hedging With Currency Swaps. Retrieved September 9, 2011, from Investopedia.com: http://www.investopedia.com/articles/forex/11/hedging-with-currency-swaps.asp#axzz1XRYSf5wt
International finance has two basic parts: integration and technical change. These basic forces have shaped the evolution of international finance for centuries. “Global integration of money and capital markets is an important part of international finance; through such channels purchasing power over real resources today is transferred from areas of the world where expected rates of r...
Securities Industry and Financial Markets Association. 2005-2010. “What You Should Know: Risks of Investing in Bonds.” Retrieved on July 16, 2011 from http://www.investinginbonds.com/learnmore.asp?catid=3&id=383
Bodie, Z., Kane, A., & Marcus, A. J. (2011). Investments. (9th ed.). New York, NY: McGraw-Hill/Irwin.
15. Hill, Charles W.L. International Business: Competing in the Global Marketplace. New York : McGraw-Hill, 2007.