Fins1612 Notes

Overall. The FASB Codification Topic 320: Investments-Debt and Equity Securities is included under the financial statement asset section and offers guidance on investment instruments that represent either a creditor relationship (debt) or an ownership interest (equity) and provides standards for reporting such investments according to generally accepted accounting principles (GAAP) (FASB ASC 320-10-05-2, 2016).

In the similar time period Japanese Yen has been in the third position with a turnover position of 20.8% in the year 2005. The overall financial market currency structure has seen a decline in the turnover position of the US Dollar to 85% from a strong position of 88%. Similarly a decline has been in the position of the Japanese Yen to 17.2% from an acceptable turnover position of 20.8%. While considering the trend of these two currencies during the period starting from 2007 and ending at 2010, it is to be noted that minute changes were seen in the two different currencies with regards to their share in foreign currency market. The US Dollar witnessed a continued fall to 84.9% from its previous 85.6% however, the Japanese Yen saw a rise from its previous position of 17.2% to an increase of1.8% that is 19%. During the same time period the US dollar and Japanese Yen were the second most traded paired currencies and was traded at around 14% of the overall foreign currency market second to the US Dollar and Euro pair. Conclusion The foreign exchange market has seen considerable changes owing to the global financial crisis. It is to be seen how different factors like economy and global politics further impact strong currencies like the US Dollar and other competing currencies such as the Japanese Yen.

Financial instruments such as derivatives and available-for-sale are measured and recognized at fair value method. The most common derivatives include forward contracts as an agreement to sell or to buy an asset at a fixed price in the future. Accordance with AASB 139, available-for-sale are those non-derivative that are designated for sale or that are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. Those financial instruments are initially recognized at their transaction price on market whose identical items (active market). Regarding unavailability active markets, management will perform their judgement and estimation to determine the fair value.

L. Financial securities are physical papers that work like a written contract when some borrows from someone. Some financial instruments are short-term loans, treasury bills, banker’s acceptances, commercial paper, CD, Eurodollar deposits, corporate bonds, and municipal bonds.

Debt securities include very debt tool that is available for buying and selling inside two groups and have understanding of some common terms like the notional amount or also known as the borrowed amount, maturity or renewal date and interest rate. Debt securities involves corporate, government and municipal bonds, CDs, collateralized securities ( like CDOs, CMOs, GNMAs) and zero coupon securities. (Investopedia, 2015). On the financial records, the debt securities are documented in the type of bonds, collateralized securities and preferred stocks.

In finance a carry trade is a strategy that consists of borrowing at a low interest rate currency to fund investment in higher yielding currencies. (Moffett) The country in which the investors borrow from is called the funding country and the country where the investment occurs is called the target country. (4) Carry trade is also termed currency carry trade; this strategy is speculative in that the currency risk is present and not managed or hedged. (Moffett) Although there are several complicated carry trades in finance, the most popular are carry trades in the foreign exchange market, which I will discuss in this paper and its role in the financial crisis of 2008.

Financial stocks are the shares issued by financial industries. With the development of global economics, the volatility of global stocks market reflects the economic situation across a number of countries. As a result, each nation’s fluctuation of stocks plays a significant role in its own economy. Furthermore, the financial stocks that act as an important sector of the whole stock market are caused fluctuating by a large number of factors. Without exception, there is a great number of reasons for the volatility of Australian financial stocks, which cause the whole financial share market fluctuating unsteadily in Australia as well. The purpose of this report is to discover the most influential cause of financial stocks volatility in Australia. Moreover, This report will analyse three main factors: a combination of three financial instruments, legal framework and inancial industry fundamentals, which influence the volatility of Australian financial stocks.

Short-term debt securities are accounted for as trading or AFS consistent with our policies for those investments. Short-term loans are carried at amortized cost. Fair values are determined consistent with policies described in Note 5 – Fair Value for the respective investment type.

1. The market is global and huge and there is a high liquidity in the market which gives a high earning potential. However if the investment is not done by proper analysis then an equally big loss can be incurred. The market is easy to make an entry or an exit from any position and by using any of the major currencies used worldwide. The position of any currency may change at any point of time within a fraction of second.

Interest rate is considered as one of the main parameters to control the economic conditions of any country. Interest rate is the key variable for time value of money, which causes a greater shift in money markets and capital markets. This study is basically carried out for the capital market or stock market.

The random walk model suggests that the current exchange rate is the best predictor of the future exchange rate. In other words, the current exchange rate reflects the future exchange rate. However, this model is questioned, past history of the exchange rate can’t predict the future of the exchange rate so we can say that the random walk model is inconsistent with the technical analysis because it tries to use today’s exchange rate to predict tomorrow’s exchange rate.

?The increased importance being attached to exchange rates is a result of the globalisation of modern business, the continuing growth in world trade relative to national economies, the trend towards economic integration and the rapid pace of change in the technology of money transfer.? (Copeland, Laurence S. 2014). In 21th July 2005, Chinese authority announced that the exchange rate system changed, from the dollar peg to the floating basket peg system. Recently, since the volatility in the forex market is growing, which makes there is increase concern about forecasting of exchange rate movements. (Schnabl, 2008).

When I started this project, I had very limited understanding of the foreign exchange market and also had a limited understanding of the economy and currencies. This Project has given me more knowledge than the average forex trader, giving me a huge advantage in the world’s most liquid market. This paper covers what I have created from the knowledge we have learned.

Currency trading is a very risky venture especially when an investor doesn't understand the market fundamentals. All types of business ventures have associated risks which vary from country to country subject to the financial infrastructure and the monetary policies in place. Other main economic drivers have to be taken into account as they contribute immensely to the stability of the host country's currency against the hard currencies to determine the exchange rates depending on the currency regime in place. Some of the main risks which are associated with currency trading include; volatility, exchange rate risk, credit risk, monetary risk, interest risk and a possibility of government intervention in the financial markets. For purposes of this paper Japan has been picked as the country to be discussed.

It was observed during the recent emerging market crises that as soon as an inflexible exchange rate and other financial sector weaknesses became apparent in an economy, institutional investors and currency speculators were attracted toward it, making a currency crisis imminent (Das 1993).  Exchange rates create a risk to a business like Unilever. A bad exchange rate creates the need for Unilever to increase the prices; a positive exchange rate gives a firm the chance to earn more income.  Unilever always monitors the financial status of the country they operate in, it always checks for any changes in the exchange rate and other economic indicators. The company’s local strategy is based from the exchange rate.  Since exchange rates are unpredictable, Unilever makes sure that it has contingency plans to ensure that any abrupt change in the exchange rates would not cost