FinancialEnglish《金融英语》内容结构

Chapter 1

(1) Commodity Money: is money whose value comes from a commodity out of which it is

made.

(2)Representative Money :representative full –bodied money refers to paper money fully

backed by a precious metal.

(3)Credit Money: is issued is based on the credit of its issuer and credit process.

(4)Electronic Money :refers to depository money that is stored and processed through

computer system or electronic payment system.

(1)Medium of exchange: eliminates and overcomes the difficulty of barter system.

(2)Unit of account :providing a common numerical measure of the value of goods and

Types

Functions

services exchanged.

(3)Store value :have some functions :save purchasing power, depreciates with inflation,

more liquid, standard of deferred payment

(1)Simple interest: refers to interest earned only on the principal of

the initial investment.

Formula: I = P R n S = P + I = P(1+Rn) I得到的利息 P本金 R每年利息率 n付息频率 S:本息和

Money

is generally

accepted in

the payment

for goods and

Interest and Interest

Interest

is a fee paid on

borrowed

assets.

(2) Compound interest: Interest for previous periods is added to

principal for the calculation of interest.

Formula: s = P (1+r) ^ n I=S-P

(3)Nominal and real interest rates. Real interest rates is approximately

the nominal interest rate minus the inflation rate.

(4)Official and market interest rates. The former is set by the central

banks or monetary interest rate is wholly

determined by the demand and supply of funds.

services or in

the repayment

of debt.

Interest Rate

Interest Rate

refers to

the ratio of the interest

formed during the period

of borrowing and lending

to the principal of the

granted loan.

(1)Narrow measure of money :M0 and M1

Include currency and demand deposit used for everyday expenditures.

Money Supply

refers to the collection of

money in an economy

including the volume of

currency in circulation and

the volume of deposits at

any point of time.

(2)Broad measure of money :M2 and M3

Narrow measure of money adds time deposits and savings account

and certain other financial assets

bi is the legal tender and had no

relation to gold,nor any foreign currencies.

bi is the sole legal money in China.

issuance of Renminbi is highly

concentrated and the People’s Bank of China

holds the right of issuance of Renminbi.

China ‘s Monetary System

Chapter 2

Definition:It is the value of a foreign nation’s

currency in terms of the home nation’s currency.

Foreign exchange rate

The spot exchange rate:

refers to the

current exchange rate

Types

The forward exchange rate: refers to

an exchange rate that is quoted and traded

Quotation

Direct quotation:

1 foreign currency

unit =X home currencunits

Indirect quotation:

1 home currency unit=X foreign currency unit

Definition:

are purchases and sales of foreign

exchanges with a purpose to meet the needs of a

certain economic activity.

Spot transaction:purchase and sale of

FX with delivery and payment to take

place no more than two working days

after the date of deal.

Foreign Exchange

Definition :

In the first place, it means the

system utilized financing

international payment.

In the second place, it means the

media used to discharge

international obligations.

The third, means the rates at

which foreign exchange is

foreign exchange transactions

Forward transaction:

is the FX

transaction that is settled on any

pre-agreed date three or more business

days after the deal date.

Swap transaction:

is the simultaneous

purchase and sales of a given of FX for two

different value date.

Types

quoted.

Foreign exchange futures

contract:

is an agreement between two

parties to buy/sell a particular currency at a

particular price on a particular future date,

as specified in a standardized contract

common to all participants in that currency

futures exchange. Which is rarely buying

or selling anything 。

Foreign exchange option contract:

gives the buyer the right, but not the

obligation, to buy (or sell) a specified

amount of one currency for another at a

specified price on a specified date.

Balance of Payment

(BOP)

Definition :

is the record of the

economic and financial flows

that take place over a

specified time period between

residents and non-residents of

a given country.

Chapter 3

The first is about the distinction between domestic resident

and foreigners .The distinction is on the basic of normal

location of resident.

The General Principle

of BOP

Double -entry system,in which each transaction gives rise to

both a credit entry and a debit entry.

The Trade Balance

Current Account

Is the basic part of the

BOP account ,which

shows all transactions

involving manufactured

goods

services.

or rendered

Non-financial Services

Investment Income

Unrequited Transfers

direct investment and portfolio

investment (different from investor

whether intends to

take an active

The components of

balance of payment

statement:

Capital and

Financial Account

role.)

other capital

Monetary gold

Special drawing rights

The reserve position in the Fund

Foreign exchange

change in reserves

Counterpart Items

Net Errors and Omissions

Equilibrium of BOP

1. trade equilibrium, which means exports equal

imports.

2. current’s equilibrium

3. the overall balance of payment statement.

Chapter 4

The way the foreign exchange market is organized

The key features

The types of assets used for financing or settling payments

imbalances among countries

The mechanism of adjustment to payments deficits and surpluses

Period:1870-1914

features:

1) Currencies are defined in terms of

International

Monetary System

Financial systemstheir gold content.

2) Payment imbalances between

countries are settled in gold.

The gold standard

3) Gold coins circulated in most of the

world.

4) Paper money.

5) Under the system ,gold was the only

standard of value.

Advantage: its stabilizing influence

Disadvantage :its inherent lack of liquidity

Period :1944-1976

Feature:

1)World Bank,and the International

Monetary Fund

2) US dollar based gold standard

3) US dollar serving as the fund’s

4) Its currency in terms of gold and the

Bretton woods system

US dollar and to keep fluctuations of the

dollar exchange rate.

5) using an adjustable peg.

6) the doller became the most widely

used currency in the international

trade.

Merits:facilitated international business

Demerit:Triffin paradox

Period:1976-now

The Jamaica systemFeatures:

1）a member country is free to choose its

own exchange rate system

2) gold cannot be used for international

transactions

3) SDR as the principal reserve asset in

the international monetary system.

Merit: has unfettered flexibility.

Demerit: lacked a unified stable

monetary.

Discount Market

Inter-bank Market

Functions

Chapter 5

Definition:financial market exist as a whole of the places and activities of the

financial and transactions of financial instruments.

1)Facilitates the lending of funds from savers to those who wish to

undertake investments.

2)Optimize the reallocation and the efficient use of resources by

promoting reasonable flow of funds.

3)a channel through which a national government carries out its

macro-economic policies.

The money market and Capital market

Types

The primary market and secondary market

The spot market and forward market

financial market

Definition :are money market in which short –term funds transferred between financial

institutions, usually for a period of one day, that is ,they are usually overnight

investment.

Functions: it can reflect the demand for and supply of funds in money markets and

almost all other financial markets acutely and timely. As the wind vane of the market

rate.

Typical Rate: LIBOR, SHIBOR and HIBOR.

Definition :is a market where bills are transferred.

Types: discount, on-discount, re-discount.

Money market

Eurodollar Market:denominated deposits at banks outside of the united states.

Advantage: is relatively free of venting regulatory costs

1)most marketable.

Features

Market for Treasury Bills

2)2)are issued by the government.

3)3)T-bills are short –term securities

Margin: is the difference between the purchase price and poor value of the

security and what you get at maturity.

Advantage: 1. virtually free of default risk.

2. Changes in inflation in also low because of the short term

to maturity.

Definition:is a bank-issued security that documents a deposit and specifies

the interest rate and the maturity date.

Market for Negotiable

Certificates of Deposit

( NCDs or CDs)

Features

1) is a term security.

2) is a bear instrument.

3) can be bought and sold until maturity.

4) in large denominations.

5) individuals to be indirect investors in NCDs.

Definition:is

an unsecured, short-term loan issued by a

corporation ,typically for financing accounts receivables and inventories.

Market for Commercial Papers

Interest rate: a discount rate, higher than the deposit rate.

Maturities:1)on longer than a months.

2)the average is 1-2months.

capital market

Market for Repos

Variations:1) reverse repo

is short repurchase

2) term repo

agreement.

Definition :Capital markets deal in long-term debts with a maturity longer than one year ,including

long -and medium-term government securities ,corporate stocks and bonds,and long-and medium-term

bank loans.

Features:

1)Long maturity from one year to several decades

2)Higher yields, higher risks and lower liquidity

3)Involving huge amounts of funds

Definition :is that part of the capital market that deals with the issue

of new securities.

Functions: 1)underwrite by an investment.

The primary market

2)Underwriting.

3)best effort agreement.

Intermediary: US is investment banks.

U k is merchant banks.

China is securities companies.

Types

Secondary market:is a financial market in which securities that have been

previously issued can be resold.

Public offering is through underwriting.

Public offering and private

Private placemen is offered in a private

placement

placement.

Listing and OTC dealing:OTC,over-the-counter market is a decentralized market

mainly for unlisted stocks and park of listed stocks of small firms.

Chapter 6

Definition :The term negotiable securities is applicable in a general sense to many

forms of negotiable instruments but usually employed for the share -capital of

corporations and for the bonds of such corporations and of local and state government.

The different of being a stockholder and a bondholder:

1 bondholders receive periodical interest payments and receive the face value when the bond

matures.

2stockholders receive dividends and/or return from the appreciation of stock price.

Types

Debt securities and equity securities

1 debt securities is a contractual agreement by the borrower to pay the holder of

the instrument fixed amounts at regular intervals until a specified date.

2 equity securities usually provide steady income as dividends but may fluctuate

significantly in their market value with the ups and downs in the economic cycle

and the fortunes of the issuing firm.

Non-certificated and registered

‘

Trading of securities

List

OTC

Eurosecurities

Securities

Definition :the capital stock of a business entity represents the original capital paid into or invested in the

business by its founders.

Common stock is a form of corporate equity ownership,stock investors receive their funds

after preferred stockholders,bondholders,creditors,etc.

Types of stocks

Preferred stock

is a special equity security that has properties of both an equity and a

debt instrument and senior to common stock ,but subordinate to

red stock usually carries no voting rights,but carries a

dividend and has priority over common stock in the payment of dividend

and upon liquidation.

Stock

Types

Convertible preferred stock

Callable preferred stock

Cumulative preferred stock and non-cumulative preferred

stock

Participating preferred stock and non-participating preferred

stock

Return

1 many companies(but not all)pay cash dividends to their shareholders

2 the value of the stock may rise

TR=

DP

EPBPBPB

Definition:a bond is a long-term debt security ,the authorized issued owes the

Risk of Stock Investment:systematic risk:such as GDP , interest rate, inflation.

holders a debt

and,promises to make payments of interest and principal,on specific date,to the holder of the bond.

unsystematic risk:unique risk , specific rick diversifiable risk

Terminology of bond

1 nominal , principal ,face amount , par value.

2 Issue price.

3 Maturity date.

Short term (bills): maturities between one and five years.

Medium term (notes): maturities between six and twelve years.

Long term (bonds): maturities greater than twelve years.

4 coupon – interest. coupon rate – the interest rate.

5 coupon date.

Treasury bond:are issued by the united states government ,which are generally regarded as

being the safest of all bonds in terms of default risk ,although all bonds have market risk if they

are sold prior to maturity.

Features: taxable at the federal level, but they are state exempt.

Zero coupon bond :are zero coupon bonds issued by the united states government.

Features: 1 do not pay interest.

2 are bought at a discount.

Bond

Types

Corporate bonds

Municipal bonds

Other categories.

The total return on a bond :TR=C/Pb +Pe-Pb/Pb

C/Pb = the current yield.

Pe-Pb/Pb = the capital gains yield.

interest rate risk.

credit risk.

Risk

purchasing power risk.

liquidity risk.

Chapter 7

Loan

Major Loan Categories

Definition :

is a sum of money advanced to a borrower ,to be repaid at a later date, usually with

interest. legally, a loan is a contract between a buyer and a seller, enforceable under relevant law. And

loan are the dominant asset in most banks portfolios.

1 short-term loans and long-term loans.

Types of loans

2 secured loans.

3 corporate and institutional loans and personal loans.

4 commercial loans and industrial loans.

5 bilateral loans and syndicated loans.

Mortgage: is a debt instrument that is secured by the collateral of

specified real estate property and that the borrower is obliged to pay

back with a predetermined set of payments.

Definition

: is a long-term mortgage loans by commercial banks to

Residential Mortgage Loans

borrowers to by house/land.

Subjects: 1 mortgagees-ownership of the property.

2 mortgagors-possession of the property.

Maturity: 30 years.

Amount: not exceed 80%if the evaluated value of the house.

Definition: are borrower by individuals to finance the purchase of durable goods or

other expenses and rapid in installment and carry a fixed interest rate.

Consumer Loans

maturity: from one to five years.

risk: consumer loan rate is higher to compensate for the greater losses.

feature: repaid in installment, and carry fixed interest rate.

types: amortization loan, credit card, non-installment loan.

Definition: a credit line is an arrangement by which a bank extends a specified amount of

Line of Credit

unsecured credit largely on the borrower for a specified time period.

Revolving credit line: if the bank agreed to lend a specific amount to a borrower, and to

allow that amount to be borrowed again once it has been repaid, such facility.

Definition:

is government guaranteed lending channeled though a commercial bank to

supplier credit.

Export Credit

Types: buyer credit-provides loans to the importer.

Supplier export-provides loans to he supplier.

Syndicated Loan:is a financing method evolved from bilateral loan.

Pass

Special-mention

Substandard

Doubtful

loss

loan classification by risk :Five –category loan classification