foreign exch. market
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| What is the foreign exchange market | show 🗑
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| show | system of direct quotation, gives the home currency price (numerator) of one unit of foreign currency EX: $1.81/£
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| cross rates | show 🗑
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| currency arbitrage | show 🗑
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| show | 1. starting investment (home currency)
2. sell investment in one country
3. sell first exchange in another country
4. resell final exchange in home country
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| transaction costs | show 🗑
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| show | used to calculate the fee charged by the bank
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| bid | show 🗑
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| show | the price it will sell the currency (offer price)
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| percent spread formula | show 🗑
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| wholesale level | show 🗑
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| retail level | show 🗑
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| show | contracts that derive their value from underlying:
assets: such as stock, bond, or currency
reference rate: such as a 90-day treasury bill rate
index: such as the S&P 500 stock index
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| show | seek risk free profit by taking advantage of differences in interest rates among countries
use forward contracts to eliminate exchange risk involved from transferring their funds from one nation to another
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| Forward market participants, Traders | show 🗑
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| Forward market participants, speculators | show 🗑
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| show | an agreement between a bank and a customer to deliver on 3 things:
1. a specified amount of currency against another currency
2. at a specified future date and,
3. at a fixed exchange rate
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| show | hedging, which is the act of reducing exchange rate risk
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| show | =forward-spot/spot x360/n x100
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Created by:
mbendik
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