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THE FOREIGN EXCHANGE MARKET - Coggle Diagram
THE FOREIGN EXCHANGE MARKET
the largest fainancial market in the world-volume of transaction worldwide averages over
1 trillion dolars daily
place where currency and bank deposits are traded in separate currencies
Foreign Exchange Risk
: the adverse consequences of unpredictable change in exchange rates
Forward Exchange Rate:
two parties agree to exchange currency and deal at some specific date in future
spot transaction
forward transaction
Currency Speculation:
short term movement of funds form one currency to for profiting from the shift of exchange rates
2 tiers:
the interbank or
wholesale
market
the client or
retail
market
Participants
Bank and nonbank foreign exchange dealers
importers and exporters, international portfolio investors, MNEs, tourists
speculators and arbitragers
central bank and treasuries
Hedging instruments
Currency options
currensy swaps
currency futures contracts