TYPES OF INTERNATIONAL FINANCIAL INSTRUMENTS

2. International Financial Instruments
Meaning:
Financial instruments are monetary contracts
between parties. They can be created, traded,
modified and settled. They can be cash
(currency), evidence of an ownership interest in
an entity (share), or a contractual right to receive
or deliver cash (bond).

3. TypesOf International Financial Instruments
1. International Bonds
2. Short Term And Medium
Term Instruments
3. Others

4. INTERNATIONAL BONDS
Foreign Bonds & Euro Bonds
Global Bonds
Straight Bonds
Convertible Bonds
Cocktail Bonds
Floating Rate Notes

5. FOREIGN BONDS & EURO BONDS
Foreign bonds
1. Foreign bonds are underwritten by the underwriters
of the country where they are issued.
2. Maturity based on the need of investors of a
particular country.
3. Foreign bonds are subjected to government
regulations in the country where they are issued.
Euro bonds
1. Euro bonds are free from rules and regulations.
2. They are tailored to the needs of the
multinational investors.

6. GLOBAL & STRAIGHT BONDS
Global Bonds
1. Bonds that can be offered within the euro market and
several other markets simultaneously is called a global
bond.
2. Global bonds are first issued in the year 1989 by
WORLDBNK.
3. It dominated by 7 country’s currency
Straight Bonds
1. These are the conventional type of bonds
2. They bear a fixed interest rate, and this rate is called
COUPON RATE .
3. It is a Traditional bond.

7. CONVERTIBLE & COCKTAIL BONDS
Convertible Bonds
1. Convertible bonds are the bonds which can be converted
into equity shares.
2. The price of the convertible bonds depends upon the price
of the equity shares.
3. The market value of these bonds is very high.
Cocktail Bonds
1. Denominated in a mixture of currencies.
2. Represent a weighted average of 5 currencies.
3. Investors get currency diversification risk.
4. Depreciation offset by appreciation of other.

8. FLOATING RATES NOTES
Floating Rate Notes
1. FRN’S were first issued in the year 1970.
2. They do not carry any fixed rate of interest.
3. The rate of interest is estimated as premium or discount
with reference to LIBOR. (London Interbank Offered Rate)
4. The interest rates are periodically revised once in 3 months
and 6 months

9. SHORT TERM AND MEDIUM TERM
INSTRUMENTS
EURO NOTES
MID-TERM EURO NOTES
EURO COMMERCIAL PAPER

10. EURONOTESANDMIDTERMEURONOTES
Euro Notes
Euro notes are short-term notes underwritten by a group of
commercial banks called as FACILITY.
1. Denominated in any currency other than the currency of
the country where they are issued.
2. Documentation facilities are minimum.
3. Represent Low cost funding route.
4. Investor too prefer them in view of short maturity.
Mid-Term Euro Notes
A mid-term Euro note, is a flexible debt instrument that is traded and
issued outside of the United States and Canada. These instruments
require fixed payments and are directly issued to the market with
maturities that are less than five years
1. It carries fixed rate of interest.

11. EURO COMMERCIAL PAPER
Euro Commercial Paper
Euro Commercial Paper is an unsecured, short-term debt
instrument that is denominated in a currency differing from
the domestic currency of the market where it is issued.
1. A short-term, debt instrument.
2. Corporations issue euro commercial papers in order to tap
into the international money markets for their financing.

12. OTHERS
AMERICAN DEPOSITORY
RECEIPTS
GLOBAL DEPOSITORY
RECEIPTS

13. AMERICAN DEPOSITORY RECEIPTS
American Depository Receipts
An American depositary receipt is a negotiable security that
represents securities of a company that trades in the
U.S. financial markets.
1. Represents ownership in the shares of a non-U.S. company
that trades in U.S. financial markets.
2. ADRs carry prices in US dollars,
3. pay dividends in US dollars,
4. And can be traded like the shares of US-based companies.
5. Examples: JPMorgan, Citibank, Deutsche Bank, Bank of
New York Mellon

14. GLOBAL DEPOSITORY RECEIPTS
Global Depository Receipts
A global depositary receipt or GDR is a bank certificate
issued in more than one country for shares in a foreign
company.
1. Very similar to an American depositary receipt.
2. Private markets use GDR’S to raise capital
denominated either in U.S. Dollar or Euro’s.
3. When private markets attempt to obtain Euros instead
of US dollars we call them GDR’S.

15. ADR VS GDR
BASIS ADR GDR
ISSUED IN United States of America European Countries
PURPOSE
Helps to acquire resources
in US
Helps to acquire
resources in different
countries
OBJECTIVE
Investment in different
countries
Investment in foreign
countries
RESTRICTIONS The USA Other Countries
LISTING OF
STOCK
USA
Other Countries

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