An American Depositary Receipt (ADR) is a certificate issued by a U.S. bank that represents shares of foreign stock. ADRs exist to facilitate the purchase and sale of foreign stocks in the U.S. markets, enabling U.S. investors to buy and own foreign stocks without having to actually purchase the foreign securities in the foreign markets. ADRs are listed and traded on US stock exchanges such as the New York Stock Exchange (NYSE) or the Nasdaq.

ADRs are denominated in U.S. dollars, meaning that all payments, including dividends and voting rights, will take place in U.S. currency no matter what the stock's currency is. As such, U.S. investors can more easily and quickly own foreign stocks, since they are able to buy and sell ADRs on U.S. exchanges and in US dollars.

ADRs offer a variety of advantages for U.S. investors looking to diversify their investments. First of all, buying an ADR eliminates foreign exchange (FX) risk, as the U.S. dollar is a globally accepted currency. This means that any currency fluctuations will not impact your return on investment. Moreover, ADRs offer a more liquid option for investing in foreign markets, as most ADRs are regularly quoted on U.S. exchanges, and their prices are highly transparent.

While buying an ADR offers many advantages for U.S. investors, however, it is not without some drawbacks. For example, there are still some foreign stocks that are unavailable in ADR form. Moreover, there are a limited number of underwriters who issue ADRs, and they demand a premium for doing so. Additionally, since an investor is subject to both U.S. and foreign tax laws, they may be exposed to double taxation and other regulatory issues.

Overall, American Depositary Receipts offer a convenient and convenient way for U.S. investors to invest in foreign stocks. While there are still some risks involved, ADRs enable investors to access foreign markets and benefit from their higher returns without having to worry about currency fluctuations.