An exchange-rate regime is the way an authority manages its currency in relation to other currencies and the foreign exchange

market. It is closely related to monetary policy and the two are generally dependent on many of the same factors. The basic types are a floating exchange rate, where the market dictates movements in the exchange rate; a pegged float, where a central bank keeps the rate from deviating too far from a target band or value; and a fixed exchange rate, which ties the currency to another currency, mostly more widespread currencies such as the U.S. dollar or the euro or a basket of currencies. Float[edit] Main article: Floating exchange rate Floating rates are the most common exchange rate regime today. For example, the dollar, euro, yen, and British pound all are floating currencies. However, since central banks frequently intervene to avoid excessive appreciation or depreciation, these regimes are often called managed float or adirty float. Pegged float[edit] Pegged floating currencies are pegged to some band or value, either fixed or periodically adjusted. Pegged floats are: Crawling bands the rate is allowed to fluctuate in a band around a central value, which is adjusted periodically. This is done at a preannounced rate or in a controlled way following economic indicators. Crawling pegs the rate itself is fixed, and adjusted as above. Pegged with horizontal bands the rate is allowed to fluctuate in a fixed band (bigger than 1%) around a central rate. Fixed[edit] Main article: Fixed exchange-rate system Fixed rates are those that have direct convertibility towards another currency. In case of a separate currency, also known as a currency board arrangement, the domestic currency is backed one to one by foreign reserves. A pegged currency with very small bands (< 1%) and countries that have adopted another country's currency and abandoned its own also fall under this category.

In finance, private equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange.[1] A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor. Each of these categories of investor has its own set of goals, preferences and investment strategies; however, all provide working capital to a target company to nurture expansion, new-product development, or restructuring of the companys operations, management, or ownership.[2] Bloomberg Businessweek has called private equity a rebranding of leveraged buyout firms after the 1980s. Among the most common investment strategies in private equity are: leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. In a typical leveraged buyout transaction, a private equity firm buys majority control of an existing or mature firm. This is distinct from a venture capital or growth capital investment, in which the investors (typically venture capital firms or angel investors) invest in young, growing or emerging companies, and rarely obtain majority control. Private equity is also often grouped into a broader category called private capital, generally used to describe capital supporting any long-term, illiquidinvestment strategy.

The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company. The size of the private equity market has grown steadily since the 1970s. Private equity firms will sometimes pool funds together to take very large public companies private. Many private equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt are issued to fund a large purchase. Private equity firms will then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO.

Private equity refers to a type of investment aimed at gaining significant, or even complete, control of a company in the hopes of earning a high return. As the name implies, private equity funds invest in assets that either are not owned publicly or that are publicly owned but the private equity buyer plans to take private. Though the money used to fund these investments comes from private markets, private equity firms invest in both privately and publicly held companies. The private equity industry has evolved substantially over the past decade or so. The basic principle has remained constant: a group of investors buy out a company and use that company's earnings to pay themselves back. What has changed are the sheer numbers of recent private equity deals. In the past ten years, the record for the most expensive buyout has been broken and re-broken several times. Private equity firms have been acquiring companies left and right, paying sometimes shockingly high premiums over these companies' market values. As a result, takeover targets are demanding exorbitant prices for their outstanding shares; with the massive buyouts that have made headlines around the world, companies now expect a certain premium over their current value. One example is Free-scale Semiconductor, who turned down a deal that paid a nearly 30% premium over its market value, holding out for a sweeter package, which it received. The sheer number of these high-priced deals that have occurred in recent years have led some to question whether this pace is sustainable in the long run. This could turn out to be a self-fulfilling prophecy; as concerns grow and people become less eager to invest in private equity deals, firms won't be able to raise the money to fund their acquisitions, essentially crippling the industry.

International Joint Ventures (IJVs) are becoming increasingly popular in the business world as they aid [1] companies to form strategic alliances. These strategic alliances allow companies to gain competitive advantage through access to a partners resources, including markets, technologies, capital and people. International Joint Ventures are viewed as a practical vehicle forknowledge transfer, such as technology transfer, from multinational expertise to local companies, and such knowledge transfer can contribute to [1] the performance improvement of local companies. Within IJVs one or more of the parties is located where the operations of the IJV take place and also involve a local and foreign company There are many motivations that lead to the formation of a JV. They include: Risk Sharing Risk sharing is a common reason to form a JV, particularly, in highly capital intensive industries and in industries where the high costs of product development equal a high likelihood of failure of any particular product. Economies of Scale If an industry has high fixed costs, a JV with a larger company can provide the economies of scale necessary to compete globally and can be an effective way by which two companies can pool resources and achieve critical mass. Market Access For companies that lack a basic understanding of customers and the relationship/infrastructure to distribute their products to customers, forming a JV with the right partner can provide instant access to established, efficient and effective distribution channels and receptive customer bases. This is important to a company because creating new distribution channels and identifying new customer bases can be extremely difficult, time consuming and expensive activities. Geographical Constraints When there is an attractive business opportunity in a foreign market, partnering with a local company is attractive to a foreign company because penetrating a foreign market can be difficult both because of a lack of experience in such market and local barriers to foreign-owned or foreign-controlled companies. Funding Constraints When a company is confronted with high up-front development costs, finding the right JVP can provide necessary financing and credibility with third parties. Acquisition Barriers; Prelude to Acquisition When a company wants to acquire another but cannot due to cost, size, or geographical restrictions or legal barriers, teaming up with a JVP is an attractive option. The JV is substantially less costly and thus less risky than complete acquisitions, and is sometimes used as a first step to a complete acquisition with the JVP. Such an arrangement allows the purchaser the flexibility to cut its losses if the investment proves less fruitful than anticipated or to acquire the remainder of the company under certain circumstances.

There are two types of International Joint Ventures: dominant parent and shared management. Within dominant parent IJVs, all projects are managed by one parent who decides on all the functional [2] managers for the venture. The board of directors, which is made up of executives from each parent, [2] also plays a key role in managing the venture by making all the operating and strategic decisions. A dominant parent enterprise is beneficial where an International Joint Venture parent is selected for [2] reasons outside of managerial input. On the other hand, shared management ventures consist of both parents managing the [2] enterprise. Each parent organizes functional managers and executives that will be within the board of [2] directors. In this form of management, there are also two types of shared management ventures. The

first type is 50:50 IJV and this is where each partner puts in 50% of the equity in return for 50% [2] participating control. The second type is where both partners can negotiate that not all shared management ventures are 50:50 and that one partner has more than a co-equal role in the IJV.

Factors affecting IJV[edit]

Economic Factors[edit]

Poor formation and planning

Problems that arise in joint ventures are usually as a result of poor planning or the parties involved being too hasty to set up shop. For example, a marketing strategy may fail if a product was inappropriate for the joint venture or if the parties involved failed to appropriately asses the factors involved . Parties must pay attention to several analysis both of the environment and customers they hope to operate in. Failure to do [4] this sets off a bad tone for the venture, creating future problems.

Unexpected poor financial performance

One of the fastest ways for a joint venture is financial disputes between parties. This usually happens when the financial performance is poorer than expected either due to poor sales, cost overruns or others. Poor financial performance could also be as a result of poor planning by the parties before setting up a joint venture, failure to approach the market with sufficient management efficiency and unanticipated changes in the market situation. A good solution to this is to evaluate financial situations thorough before [4] and during very step of the joint venture.

Management problems

One of the biggest problems of joint ventures is the ineffective blending of managers who are not used to working together of have entirely different ways of approaching issues affecting the organization. It is a well-known fact that many joint ventures come apart due to misunderstanding over leadership strategies. For a successful joint venture, there has be understanding and compromise between parties, respect and integration of the strengths of both sides to overcome the weaker points and make their alliance [4] stronger.

Inappropriate management structure

In a bid to have equal rights in the venture, there could be a misfit of managers. As a result, there is a major slowdown of decision making processes. Daily operational decisions that are best made quickly for more efficiency of the business tends to be slowed down because there is now a committee that is in place to make sure both parties support every little decision. This could distract from the bigger picture [4] leading to major problems in the long run.

Economic Environment of IJV[edit]

The ultimate goal of a successful JV partnership is more customers and a stronger body. To ensure a JV's partnerships are as profitable as possible, it helps to look at them from the customers point of view. The features a JV partnership should aim to address for an effective marketing campaign: Channeling the

expertise and strengths of both parties to maximize value for the customers and stakeholders while [4] downplaying the weaknesses and presenting a united font.

Cultures of IJV[edit]
When a joint venture is formed, it is an attempt at blending two or more cultures in the hope of leveraging on the strength of each party. Lack of understanding of the cultures of the individual parties poses a huge problem if not addressed. A common problem in these multi-cultural enterprises is that the culture is not considered in their initial formation. It is usually assumed that the cultural issues will be addressed later when the new unit has been created. Usually, compromises are reached and certain cultural from the parties are kept on while others are others are either out rightly discarded or modified

Foreign exchange risk (also known as exchange rate risk or currency risk) is a financial risk posed by [1][2] an exposure to unanticipated changes in the exchange rate between two currencies. Investors and multinational businesses exporting or importing goods and services or making foreign investments throughout the global economy are faced with an exchange rate risk which can have severe financial consequences if not managed appropriately

Economic Exposure[edit]
A firm has economic exposure (also known as operating exposure) to the degree that its market value is influenced by unexpected exchange rate fluctuations. Such exchange rate adjustments can severely affect the firm's market share position with regards to its competitors, the firm's future cash flows, and ultimately the firm's value. Economic exposure can affect the present value of future cash flows. Any transaction that exposes the firm to foreign exchange risk also exposes the firm economically, but economic exposure can be caused by other business activities and investments which may not be mere international transactions, such as future cash flows from fixed assets. A shift in exchange rates that influences the demand for a good in some country would also be an economic exposure for a firm that sells that good.

Translation Exposure[edit]
A firm's translation exposure is the extent to which its financial reporting is affected by exchange rate movements. As all firms generally must prepare consolidated financial statements for reporting purposes, the consolidation process for multinationals entails translating foreign assets and liabilities or the financial statements of foreign subsidiary|subsidiaries from foreign to domestic currency.While translation exposure may not affect a firm's cash flows, it could have a significant impact on a firm's reported earnings and therefore its stock price.Translation exposure is distinguished from transaction risk as a result of income and losses from various types of risk having different accounting treatments.

Contingent exposure[edit]
A firm has contingent exposure when bidding for foreign projects or negotiating other contracts or foreign direct investments. Such an exposure arises from the potential for a firm to suddenly face a transactional or economic foreign exchange risk, contingent on the outcome of some contract or negotiation. For example, a firm could be waiting for a project bid to be accepted by a foreign business or government that if accepted would result in an immediate receivable. While waiting, the firm faces a contingent exposure

from the uncertainty as to whether or not that receivable will happen. If the bid is accepted and a receivable is paid the firm then faces a transaction exposure, so a firm may prefer to manage contingent exposures.

Measurement[edit]
If foreign exchange markets are efficient such that purchasing power parity, interest rate parity, and the international Fisher effect hold true, a firm or investor needn't protect against foreign exchange risk due to an indifference toward international investment decisions. A deviation from one or more of the [5] three international parity conditions generally needs to occur for an exposure to foreign exchange risk. Financial risk is most commonly measured in terms of the variance or standard deviation of a variable such as percentage returns or rates of change. In foreign exchange, a relevant factor would be the rate of change of the spot exchange rate between currencies. Variance represents exchange rate risk by the spread of exchange rates, whereas standard deviation represents exchange rate risk by the amount exchange rates deviate, on average, from the mean exchange rate in a probability distribution. A higher standard deviation would signal a greater currency risk. Economists have criticized the accuracy of standard deviation as a risk indicator for its uniform treatment of deviations, be they positive or negative, and for automatically squaring deviation values. Alternatives such as average absolute [4] deviation and semivariance have been advanced for measuring financial risk.

Value at Risk[edit]
Practitioners have advanced and regulators have accepted a financial risk management technique called value at risk (VAR), which examines the tail end of a distribution of returns for changes in exchange rates to highlight the outcomes with the worst returns. Banks in Europe have been authorized by the Bank for International Settlements to employ VAR models of their own design in establishing capital requirements for given levels of market risk. Using the VAR model helps risk managers determine the amount that could be lost on an investment portfolio over a certain period of time [4] with a given probability of changes in exchange rates.

Management[edit]
See also: Foreign exchange hedge Managers of multinational firms employ a number of foreign exchange hedging strategies in order to protect against exchange rate risk. Transaction exposure is often managed either with the use of the money markets, foreign exchange derivatives such as forward contracts, futures contracts, options, and swaps, or with operational techniques such as currency invoicing, leading and lagging of receipts and [6] payments, and exposure netting. Firms may exercise alternative strategies to financial hedging for managing their economic or operating exposure, by carefully selecting production sites with a mind for lowering costs, using a policy of flexible sourcing in its supply chain management, diversifying its export market across a greater number of countries, or by implementing strong research and development activities and differentiating its products [6] in pursuit of greater inelasticity and less foreign exchange risk exposure. Translation exposure is largely dependent on the accounting standards of the home country and the translation methods required by those standards. For example, the United States Federal Accounting

Standards Board specifies when and where to use certain methods such as the temporal method and current rate method. Firms can manage translation exposure by performing a balance sheet hedge. Since translation exposure arises from discrepancies between net assets and net liabilities on a balance sheet solely from exchange rate differences. Following this logic, a firm could acquire an appropriate amount of exposed assets or liabilities to balance any outstanding discrepancy. Foreign exchange derivatives may also be used to hedge against translation exposure

1. A multinational corporation can obtain additional funds by issuing shares to its existing shareholders or to new shareholders. Most MNCs have shares listed on the stock market of the country in which they are headquartered, but many list their shares on several stock exchanges around the world, with the U.S. stock exchanges being most popular. 2. The largest stock markets are in the United States, the United Kingdom, and Japan. These markets are also large relative to the GDP of their respective countries, unlike European stock markets. In Europe, bank financing is a relatively more important source of funding for companies. 3. Most stock markets are private organizations or are owned by a set of financial institutions (bankers bourses), although many of the most prominent ones are now publicly traded corporations. 4. A trading system may be order driven or price driven. In a price-driven system, dealers who act as market markers for certain stocks stand ready to buy at a bid price and sell at an ask price. NASDAQ in the United States is such a system. In an order-driven system, share prices are determined in an auction that brings together the supply and demand of shares. The TSE in Tokyo is an example of an order-driven system. The NYSE has elements of both systems. 5. Stock markets around the world have become increasingly automated. 6. Stock markets have consolidated in response to competitive pressures to allow international investors more time to trade and to automatically cross-list shares. 7. Turnover is the total volume traded on an exchange during a year divided by the exchanges market capitalization. It is often viewed as a liquidity indicator. The United States has the largest turnover of all developed stock markets. 8. Turnover is negatively related to trading costs, which consist of brokerage commissions, bid ask spreads, and market impact (the fact that the price may move against you when you trade a large order). 9. Emerging stock markets are the stock markets of developing countries, which developed rapidly during the 1990s, following a process of financial liberalization. Among the largest emerging markets today are India, South Africa, Taiwan, Korea, Russia, and Brazil. 10. Transaction costs in emerging markets are larger and turnover is generally lower than in developed markets. 11. When foreign companies list their shares in the United States, they typically use American depositary receipts (ADRs), which are held in custody by a depositary bank and represent a certain number of original shares issued in the home stock market. 12. ADR programs come in three varieties: Level I (not exchange traded), Level II (exchange traded), and Level III (exchange traded and capital raising). In addition, private placements occur through Rule 144. 13. Global depositary receipts (GDRs) are similar to ADRs. However, they can be traded on many exchanges in addition to U.S. exchanges. 14. Cross-listing a stock can lower a companys cost of capital through several channels, including improved liquidity and better corporate governance. It can heighten the awareness of the firms brands, provide direct access to foreign capital, and make future capital access easier. 15. Global registered shares (GRSs) trade simultaneously in different markets around the world, in different currencies, with the shares being completely fungible across markets. 16. A strategic alliance is an agreement between legally distinct companies to share the costs and benefits of a particular investment.

Definition of 'Equity Financing'

The process of raising capital through the sale of shares in an enterprise. Equity financing essentially refers to the sale of an ownership interest to raise funds for business purposes. Equity financing spans a wide range of activities in scale and scope, from a few thousand dollars raised by an entrepreneur from friends and family, to giant initial public offerings (IPOs) running into the billions by household names such as Google and Facebook. While the term is generally associated with financings by public companies listed on an exchange, it includes financings by private companies as well. Equity financing is distinct from debt financing, which refers to funds borrowed by a business. Equity financing involves not just the sale of common equity, but also the sale of other equity or quasi-equity instruments such as preferred stock, convertible preferred stock and equity units that include common shares and warrants. A startup that grows into a successful company will have several rounds of equity financing as it evolves. Since a startup typically attracts different types of investors at various stages of its evolution, it may use different equity instruments for its financing needs. For example, angel investors and venture capitalists who are generally the first investors in a startup are inclined to favor convertible preferred shares rather than common equity in exchange for funding new companies, since the former have greater upside potential and some downside protection. Once the company has grown large enough to consider going public, it may consider selling common equity to institutional and retail investors. Later on, if it needs additional capital, the company may go in for secondary equity financings such as a rights offering or an offering of equity units that includes warrants as a sweetener. The equity-financing process is governed by regulation imposed by a local or national securities authority in most jurisdictions. Such regulation is primarily designed to protect the investing public from unscrupulous operators who may raise funds from unsuspecting investors and disappear with the financing proceeds. An equity financing is therefore generally accompanied by an offering memorandum or prospectus, which contains a great deal of information that should help the investor make an informed decision about the merits of the financing. Such information includes the company's activities, details on its officers and directors, use

of financing proceeds, risk factors, financial statements and so on. Investor appetite for equity financings depends significantly on the state of financial markets in general and equity markets in particular. While a steady pace of equity financings is seen as a sign of investor confidence, a torrent of financings may indicate excessive optimism and a looming market top. For example, IPOs by dot-coms and technology companies reached record levels in the late 1990s, before the tech wreck that engulfed the Nasdaq from 2000 to 2002. The pace of equity financings typically drops off sharply after a sustained market correction due to investor risk-aversion during this period.

Funding Avenues In Global Capital Markets

Global financial markets are a relatively recent phenomenon. Prior to 1980, national markets were largely isolated from each other and financial intermediaries in each country operated principally in that country. The foreign exchange market and the Eurocurrency and Eurobond markets based in London were the only markets that were truly global in their operations. Financial markets everywhere serve to facilitate transfer of resources from surplus units (savers) to deficit units (borrowers), the former attempting to maximize the return on their savings and the latter looking to minimize their borrowing costs. An efficient financial market thus achieves an optimal allocation of surplus funds between alternative uses. Healthy financial markets also offer the savers a wide range of instruments enabling them to diversify their portfolios. Capital markets of the newly industrializing South East Asian economies. Even in an advanced economy like that of Germany, the structure of corporate financing is such that most of the companies rely on loans from domestic banks for investment and investors do not appear to show much interest in foreign issues. All these reservations, it can be asserted that the dominant trend is towards globalization of financial markets. There are two broad groups of borrowers, of the total debt raised on the international markets in recent years. There are fluctuations in the relative importance of different types of instruments as markets respond to changing investor / borrower needs and changes in the financial environment. It is clear that for developing countries, as far as debt finance is concerned, external bonds and syndicated credits are the two main sources of funds.

Syndicated Credit Debt securities An overview of finding avenues in the global capital markets is the procedural aspects of actually tapping a market acquiring the necessary clearances and approvals, preparing various documents, investor contact and so forth-are usually quite elaborate. Issues related to accounting, reporting and taxation are quite complex and require specialist expertise. We will keep clear of these matters and concentrate on the basic features and cost-risk characteristics of the various instruments.

The following are some of the important factors to consider in evaluating borrowing options: Interest Rate: Interest is money paid to the lender for the use of borrowed funds. Comparing interest rates is a helpful indicator of the relative cost when comparing two loans. Fixed vs. Variable Rate: While most education loans feature variable interest rates, some have interest rates that are fixed for the life of the loan. Interest charged on variable rate loans is subject to change, anywhere from monthly to annually. The interest rate is normally tied to an index such as Prime Rate, U.S. Treasury Bills, Auction Rate Securities, or another rate that may fluctuate over time. In evaluating a variable rate loan, you should understand how frequently your payment may change, and whether there is any cap on how high the interest rate may go. Loan Fees: In addition to interest, many loans have additional fees that are either added to the loan amount or deducted from the loan proceeds. These may be referred to as Origination Fees or Guarantee Fees. Annual Percentage Rate (APR): The APR reflects the total cost of borrowing money over the life of the loan, considering not only the interest rate, but also the effect of other fees on the total cost of repaying the amount financed.

Required Monthly Payment: For many families, the amount of the monthly payment is an important factor in choosing a loan. To estimate the monthly payment required to repay each thousand dollars borrowed for a MEFA Loan, please visit the College Loans section of MEFA's website at www.mefa.org and try the Loan Payment Calculators. Grace Period: The grace period is the six-month payment-free period that follows the student's graduation, withdrawal, or dropping below half-time enrollment status.