Market of Foreign Exchange

Question 1

Introduction to Forex Market

Answer 1

• largest financial market in the world
• open 24/7
• 7 trillion volume per day
• London is the biggest trading center

Question 2

Exchange rate quotes

Answer 2

Currency pairs - base currency/quote currency
- the base is always given first.

Question 3

What does USD/EUR mean?

Answer 3

How many EUR per USD

Question 4

What does EUR/USD mean?

Answer 4

How many USD per EUR

Question 5

What is it called when the currency goes up?

Answer 5

The currency increases in value - currency appreciation

Question 6

What is it called when the currency goes down?

Answer 6

The currency decreases in value - currency depreciation

Question 7

What is a direct quote?

Answer 7

Price in home currency (USD) for unit of foreign currency (EUR).
Example:
EUR/USD = 1.09 - 1 EUR will cost me $1.09

Question 8

What is an indirect quote?

Answer 8

Amount of foreign currency (EUR) per unit of home currency (USD).
Example:
USD/EUR = 0.92 - for $1 you will get 0.92 EUR

Question 9

What are the types of Forex Markets?

Answer 9

1. Spot market - current transactions
2. Forward market - future transactions

Question 10

What is the forward market?

Answer 10

• purchase or sale of currency in the future
• forward rate for delivery in N months
• the forward rate is the expected future spot rate