Topic 6-FX Flashcards
1
Q
What are the characteristics of an FX market
A
OTC market
geographically dispersed
informal market
24-hr market
2
Q
Why is there a need for foreign currency
A
speculation
international trade and investment
hedging
3
Q
What are the types of foreign exchange exposure?
A
transaction exposure
translation exposure
economic exposure
4
Q
What are the types of foreign exchange rate quotations
A
indirect
direct
cross
5
Q
What are the hedging methods?
A
currency options
forward contracts
currency futures
money market hedge
6
Q
What are the types of foreign exchange contracts?
A
spot contract
forward contract
7
Q
What are the reasons for using forward contracts?
A
to hedge an exposure
speculate by taking an exposure
8
Q
What are the factors affecting foreign exchange rates?
A
price level balance of payments interest rate speculation confidence central bank intervention
