Post on 24-Apr-2015
description
EURODOLLARSEURODOLLARS
Made byMade byAnhar Alam (0810-BBA06)Anhar Alam (0810-BBA06)
EURODOLLARSEURODOLLARS• Eurodollars are time
deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve.
• An American dollar held by a foreign institution outside the U.S., usually a bank in Europe, often as a result of payments made to overseas companies for merchandise.
EURODOLLARSEURODOLLARS
• Many contracts around the world call for the payment of U.S dollars due to the dollar’s stability.
• Many multinational companies
and governments choose to
hold dollars.• After World War II most of these
deposits were held in
New York money center banks.
Stability of DollarStability of Dollar
• Eurodollar market has continue to grow rapidly.
• The primary reason is that depositors receive higher rate of return on a dollar deposit in the Eurodollar market than in the domestic market.
London Interbank MarketLondon Interbank Market
• Some large London banks act as brokers in the interbank Eurodollar market.
• Eurodollar are an alternative to FED funds.
• Banks from around the world buy and sell overnight funds in this market.
• Many banks participate in this market, it is extremely competitive.
London Interbank MarketLondon Interbank Market London interbank bid rate (LIBID):-• The London Interbank Bid Rate (LIBID) is a bid rate; the
rate bid by banks on Eurocurrency deposits (i.e., the rate at which a bank is willing to borrow from other banks). It is "the opposite" of the LIBOR.
London interbank offer rate (LIBOR):-• An interest rate at which banks can borrow funds, in
marketable size, from other banks in the London interbank market.
Eurodollar Certificate of Eurodollar Certificate of depositdeposit
• A certificate of deposit denominated in U.S. dollars, but issued and held outside the United States. Almost all Eurodollar certificates of deposit are issued by banks in London.
• Eurodollar are time deposit with fixed maturities.