Spot Markets for Foreign Currency  Flashcards
What is the base currency?
Online: The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency.
Slide show: The currency traded is called base currency whereas the currency doing the pricing is called quoted currency or pricing currency.
What is the direct quotation?
How many units of domestic currency per unit of foreign currency?
For a US investor, 1.60 $/£ is a direct quote.
HC/FC
What is indirect quotation?
How many units of foreign currency per unit of domestic currency?
For a US investor, 0.625 £/$ is an indirect quote.
FC/HC
In direct quotation, what is the base currency? And what is the priced currency?
FC as base currency and HC as pricing (quoted) currency.
What is primary rates?
All rates that involves the USD are called primary rates
What is cross rates?
All other rates not involving the USD are called cross rates.
What does it mean that a market is very liquid?
higher trading volume –> lower spread
Why is synthetic rates often more efficient?
Synthetic trades are often more ecient since the USD market is usually very liquid (higher trading volume, lower spread).
