ABSTRACT
The Eurodollar market as a whole is frequently praised for its efficiency and, in a sense, this epithet is justified. Risk in Eurofinance markets comprises the usual features associated with lending in any market, together with sovereign or country risk when lending involves transactions across national boundaries. In many respects, markets commonly embody techniques for containing risk. Some arguments for controlling directly the workings of Eurocurrency markets have been based upon the scope for foreign exchange speculation available in these markets. Nevertheless the efficiency of Eurofinance markets must have increased the speed with which doubts about existing exchange rates have been communicated. The foreign exchange functions of Eurofinance markets cannot help but influence exchange relativities. Increased maturities associated with easing of the market are linked to maintaining profitability so long as the conventional relationship of rising yields with lengthening maturities holds.
