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Statements made normally by the central bank or government minister designed to bolster market sentiment with respect to the currency.
Is concerned with past price and volume trends and often with the help of chart analysis in a market in order to be able to make forecasts about future price developments of the commodity being traded.
An adjustment to price not based on market sentiment but technical factors such as volume and charting.
Method of determining accounting exposure which translates all balance sheet items at the current rate of exchange, not the one at the time the cost was incurred.
(1) a formal offer to supply or purchase goods or services.
(2) In the UK the term for the weekly Treasury Bill issue.
Maturity or number of days to maturity normally on bills of exchange.
Terms of Trade
The ratio between export and import price indices.
Theory of Elasticities
A model of exchange rate determination stating that the exchange rate is simply the price of the foreign exchange which maintains the BOP in equilibrium. The degree to which the exchange rate responds to a change in price.
Threshold of Divergence
A safety feature for the EMS which creates an emergency exit for currencies which become the singular focus of various adverse forces. The threshold of divergence indicates when the specific country with the pressured currency should take additional steps other then simple central bank intervention in the foreign exchange markets.
A measure of the sensitivity of the price of an option to a change in its time to expiry.
A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
A U.S. foreign exchange technicality. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
A minimum change in price, up or down.
See Deal Slip.
A measure of a banks financial strength used by the BIS being the shareholders' equity available to cover actual or potential irredeemable and non-cumulative preference shares. It excludes, hybrid forms of capital such as fixed term stock, goodwill, and revaluation reserves. BIS has a minimum requirement of 4 percent on risk-weighted assets.
A condition where there is a shortage of credit as a result of monetary policy restricting the supply of credit normally through raising interest rates.
Tokyo International Financial Futures Exchange.
The decline in the time value of an option as the expiry approaches.
Interest bearing deposits at a savings institution that has a specific maturity.
That part of an option premium which reflects the length of time remaining in the option prior to expiration. The longer the time remaining until expiration, the higher the time value.
Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
Colloquial term for announcement in a publication that a loan or bond has been arranged.
Tomorrow Next (Tom Next)
Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
The date on which a trade occurs.
The difference between the value of imports and exports. Often only reported in visible trade terms.
Trade-weighted Exchange Rate
The changes in the exchange rate against a trade weighted basket including the currencies of the county's principal trading partners.
Transferable options with the right to buy and sell a standardised amount of a currency at a fixed price within a specified period.
Smallest transaction size acceptable.
See deal ticket.
The date on which a trade occurs.
A portion of, specifically used for borrowings from the IMF.
The buying or selling of securities resulting from the execution of an order.
Potential profit and loss generated by current foreign exchange transactions.
The calculation of loss or profit resulting from the valuation of foreign assets and liabilities for balance sheet purposes, when consolidating into the base currency.
Short-term obligations of a Government issued for periods of one year or less. Treasury bills do not carry a rate of interest and are issued at a discount on the par value. Treasury bills are repaid at par on the due date. In the UK they are normally for 91 days, and are offered at weekly tenders. In the US they are auctioned.
The total money value of currency contracts traded is calculated by multiplying size by the number of contracts traded.
A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa.
When a dealer quotes both buying and selling rates for foreign exchange transactions.
Another term for an open position.
Under Reference (Order)
Before finalizing a transaction all the details should be submitted for approval to the order giver, who has the right to turn down the proposal.
An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
A colloquial term for reversing a transaction, e.g., a spot sale by means of a forward purchase or if done in error a spot purchase.
Term for sale of assets or unwinding positions either to limit loss or to undermine other market participants positions.
If the average maturity of a banks liabilities is less than that of its assets, it is said to be running an unmatched book.
Selling of assets and or instruments to square a position.
A transaction executed at a price greater than the previous transaction.
Currency index which consist of the weighted average of the prices of ten foreign currencies against the U.S. Dollar: Deutsche Mark, Japanese Yen, French Franc, British Pound, Canadian Dollar, Italian Lira, Dutch Guilder, Belgian Franc, Swedish Krona, and Swiss Franc.
Exchange rate quotation on a reciprocal basis. Also known as an American Quote.
Value at Risk
The expected loss from an adverse market movement.
The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country/countries of the foreign currency/currencies. The value date then moves forward a day. The enquirer is the party who must make sure that his spot day coincides with the one applied by the respondent. The forward months maturity must fall on the corresponding date in the relevant calendar month. If the one month date falls on a non-banking day in one of the centres, the operative date would be the next business day that is common. The adjustment of the maturity for a particular month does not effect the other maturities that will continue to fall on the original corresponding date if they meet the open day requirement. If the last spot date falls on the last business day of a month, the forward dates will match this date by also falling due on the last business day (also referred to as maturity date).
Normally settlement for two working days from today.
Transaction executed for same day settlement; sometimes also referred to as "cash transaction."
A simple option whose terms and conditions do not include any provisions other than exercise style, expiry and strike. To compare with exotic options which have additional terms.
Profits or losses on open positions in futures and options contracts which are paid or collected daily.
Expresses the price change of an option for a one per cent change in the implied volatility.
Velocity of Money
The speed with which money circulates or turnover in the economy. It is calculated as the annual national income: average money stock in the period.
Vertical (bear or bull) Spread
The sale of an option with a high exercise price and the purchase (in the case of a bull) or the sale (in the case of a bear) of an option with a lower exercise price. Both options will have the same expiration date.
Trade in merchandise goods as compared with capital flows and invisible trade.
A measure of the amount by which an asset price is expected to fluctuate over a given period. Normally measured by the annual standard deviation of daily price changes. (historic). Can be implied from futures pricing, see implied volatility.
A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.
Term for where a trader takes a position, then has to move against it, triggering stop-loss limits and liquidation of positions, then having to move in the original direction. Normally occurs in volatile markets.
Money borrowed in large amounts from banks and institutions rather than from small investors.
Wholesale Price Index
It measures changes in prices in the manufacturing and distribution sector of the economy and tends to lead the consumer price index by 60 to 90 days. The index is often quoted separately for food and industrial products.
Where financial institutions or companies raise funds for specific reporting dates such as year ends to give the appearance of high liquidity.
Discretionary element in the monetary reserves of a central bank.
A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both (all relevant currency centres in the case of a cross are open).
A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.
The seller of a call or put option in connection with an opening position who receives a premium and who is required to perform if it is exercised.
The graph showing changes in yield on instruments depending on time to maturity. A system originally developed in the bond markets is now broadly applied to various financial futures. A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities. A negative sloping curve has higher interest rates at the shorter maturities.
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Send money overseas at better rates than the banks.