Chapter 5 (1)

Question 1

Foreign exchange (FX) market

Answer 1

Encompasses the conversion of purchasing power from one currency into another, bank deposits of foreign currency, the extension of credit denominated in a foreign currency, foreign trade financing, trading in foreign currency options and futures contracts and currency swaps

Question 2

who provides the core of the FX market

Answer 2

international banks (100-200)

Question 3

The spot market

Answer 3

Involves almost the immediate purchase or sale of foreign exchange.

Typically, cash settlement is made two business days after the transaction for trades between the U>S dollar and a non-north american currency

Question 4

Spot rate

Answer 4

currency quoatation can be stated in direct or indirect terms.

Question 5

cross exchange rate

Answer 5

An exchange rate between a currency pair where neither currency is the U.>s dollar