07 - Foreign Exchange

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  1. Bank for International Settlements (BIS)
    Central bank of central banks.

    Conducts market research and makes recommendations relating to the supervision and stability of the international financial system.
  2. Swift
    Electronic system operated by global financial institutions that facilitates international financial transactions.
  3. The City
    Financial centre within London
  4. Exchange Rate
    Value of one currency relative to another currency.
  5. Floating Exchange Rate
    Exchange rate is determined by supply and demand factors in the FX markets.
  6. Managed Float
    Exchange rate is held within a defined band relative to another currency.

    Limited fluctuations allowed.
  7. Crawling Peg
    Managed float where an exchange rate is allowed to appreciate in controlled steps over time.
  8. Linked Exchange Rate Regime
    Value of the pegged currency is tied into the value of another currency or basket of currencies.
  9. FX Markets
    Facilitate the buying and selling of foreign currencies.
  10. FX Dealers
    Institutions that quote buy and sell prices and acts as principals in the FX markets.
  11. FX Brokers
    Obtain the best prices n the global FX markets and match FX dealer's buy and sell orders for a fee.
  12. Official Reserve Assets
    Central bank holdings of foreign currencies, gold and international drawing rights.
  13. Clean Float
    Exchange rate is determined by market forces without central bank intervention.
  14. Dirty Float
    Central bank regularly intervenes in the FX market to influence a floating exchange rate.
  15. Long Position
    The underlying asset has been bought forward.
  16. Short Position
    Entering into a forward contract to sell an asset that is not held at that time.
  17. FX Dealing Room
    Physical location of FX dealers (usually within institution's treasury operation).
  18. Spot Transaction
    Locks in an exchange rate today for settlement and delivery in two business days.
  19. Forward Transaction
    Locks exchange rate today for settlement and delivery at a specified date beyond the spot date.
  20. Tod (Today) Values (Tom (Tomorrow))
    FX contract with settlement and delivery today.
  21. Base Currency
    First-named currency in an FX quote.

    One unit expressed in terms of another currency.
  22. Terms Currency
    Second-named currency in an FX quote.

    Used to express the value of the base currency.
  23. Quote
    Direct - USD is the base currency.

    Indirect - Currency other than USD is the base currency.
  24. Cross-rate
    Exchange rate of two currencies, neither being the USD.
  25. Interest Rate Parity
    Principle that exchange rates will adjust to reflect interest rate differentials between countries.
  26. Forward Points
    Forward exchange rate variation to a spot based on interest rate differentials.
  27. Forward Discount (Premium)
    Forward exchange rate is less (higher) than the spot rate.

    Interest rates in the base-currency country are higher (lower) than the terms-currency country.
  28. Hard Currency
    Currencies are generally accepted in international trade and financial transactions.

    • USD
    • JPY
    • GBP
    • EUR
Card Set:
07 - Foreign Exchange
2016-03-07 23:47:03
230 - Foreign Exchange
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