Chap. 5 Flashcards
The teo types of FX Market
- Interbank Market (whoolesale)
- Client Market (retail)
What do market participants include:
International banks, their customers, nonbank dealers, FX brokers and central banks
What’s the direct quotation
The US dollar equivalent
WHat’s the indirect quotation
The price of U.S dollar in the foreign currency
What communication to international commercial banks use
- SWIFT: Society of Worldwide Inter bank Financial Telecommunications
- CHIPS: Clearing House Interbank Payment System
- ECHO: Exchange Clearing House Limited
The first The price a dealer is willing to pay you for something
Bid Price
The amount a dealer want you to pay for something
Ask Price
The mechanic of how a marketplace operates?
Market Microstructure
Involves agreements to buy and sell foreign currencies in the future at prices agreed upon day
Forward market
If you have agreed to sell anything (spor or forwards), you are ______
short
If you have agreed to buya nything (forward or spot) you are _____
long
An agreement to provide a counterparty with something he or she wants in exchange for something that you want. Account for 56% of interbank FX trading
Swaps
