Foreign Exchange Flashcards
1
Q
intro FX Market
A
OTC (Over the Counter) Market
Major International Banks
London Largest Centre
2
Q
First currency
A
Base Currency
Unit of 1
3
Q
Second Currency
A
Counter or Quoted currency
Used for pricing purpose
4
Q
American Style
A
Dollar not base currency
JPY/USD
US Products priced in Dollars = American Style
5
Q
European Style
A
Dollar is base currency
USD/JPY
6
Q
Spot Market
A
Trade settlement within 2 days
7
Q
Forward Market
A
Trade settlement longer than 2 days
8
Q
Forward Rate Formula
A
Spot Rate x (1+quote currency short - term rate ) /
1 + Base Currency short - term rate
9
Q
Key points with formula
A
Interest rates are annual - convert on basis of months in qs
percentage to decimal /100
10
Q
Current Price of a foreign currency
A
Spot Rate
