Interest Rate Forwards

Question 1

is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery.

are used for trading a range of instruments, but the term is primarily used with reference to the foreign exchange market.

Answer 1

Forward Markets

Question 2

are over-the-counter contracts between parties that determine the rate of interest to be paid on an agreed-upon date in the future.

Answer 2

Forward Rate Agreement

Question 3

acts as a discount rate for a single payment from one future date and discounts it to a closer future date.

Answer 3

Forward Interest Rates

Question 4

uses call and put options with the same strike price and time to expiry to create an offsetting forward position.
>can help investors reduce their risk.
>requires that the investor pay a net option premium when executing the contract.

Answer 4

Synthetic Forward

Question 5

> a type of forward currency exchange rate agreement designed to provide a currency hedge over a specific forward period. A notional principal agreement
provides risk control usually linked but not attached to another position or transaction.
is equivalent to a forward period currency swap without a principal exchange.

Answer 5

Synthetic Agreement for Forward
Exchange (SAFE)

Question 6

refer to a legal derivative contract wherein the investor has the right, but not the obligation to exchange a specific currency for another at a
future date.

these options put one party (the buyer) in a privileged position as it can sell the contract if it is profitable before the expiration date or just
ignore the locked-in price if that is more profitable.

Answer 6

Exchange-Traded Currency

Question 7

is a foreign exchange transaction that involves trading principal and interest in one currency for the same in another currency.

Answer 7

Currency Swap

Question 8

is an agreement between two foreign parties to swap interest payments on a loan made in one currency for interest payments on a loan made in another currency.

Answer 8

Foreign Currency Swap (FOREX Swap)

Question 9

(known as a Forex Option)
is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain currency at a specified exchange rate on or before a specified date.

Answer 9

Currency Option