文档介绍：The Global Capital Market: Performance and Policy Problems
WONG Ka Fu
10th April 2000
The growing international capital market
1960s:
Since 1980s:
cross country lending and borrowing became routine
banks did business on domestic currency, with domestic customers
Foreign exchange market
Currencies
International capital market
Currencies
+
stocks, bonds, bank deposits in different countries
International capital market
The market which residents of different country trades assets.
Goods
and
services
Assets
Goods
and
services
Assets
Home
Foreign
Goods
and
services
Goods
and
services
Home
Foreign
Use home output (export) to exchange for foreign output (import)
Goods
and
services
Assets
Home
Foreign
Use today’s home good to exchange for claims for foreign future goods.
., intertemporal trade
Assets
Assets
Home
Foreign
Use home’s claim for future goods to exchange of foreign claims of future goods
Portfolio diversification
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Why diversify our portfolio?
Most people are risk averse.
Gamble
half the time you win $1000
half the time you lose $1000
average payoff = 1/2*(1000) + 1/2*(-1000) = 0
A risk averse agent weighs the possibility of losing 1000 more than the possibility of winning 1000 and hence will not gamble.
Portfolio diversification
W: wealth of a typical investor, to be divided between home and foreign assets.
: proportion of wealth allocated to home assets.
Two states:
state 1 with probability q,
state 2 with probability (1-q)
State 1 (with probability q)
a unit of wealth invested in the home asset pays out H1 units of output, and
a unit of wealth invested in the foreign assets pays out F1 units of output.
C1 = [ H1 + (1-)F1 ] W