A market for converting the currency of one country into that of another country.
What is Foreign Exchange Market?
100
The rate at which one currency is converted into another.
What is Exchange Rate?
100
The adverse consequences of unpredictable changes in exchange rates.
What is Foreign Exchange Risk?
100
The practice that involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.
What is Currency Speculation?
100
This practice involves borrowing in one currency where interest rates are low, and then using the proceeds to invest in another currency where interest rates are high.
What is Carry Trade?
200
The rate at which a foreign exchange dealer converts one currency into another currency on a particular day.
What is Spot Exchange Rate?
200
When two parties agree to exchange currency and execute the deal at some specific date in the future.
What is Forward Exchange?
200
Exchange rates used when two parties agree to exchange currency and execute the deal at some specific date in the future.
What is Forward Exchange Rates?
200
The simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.
What is Currency Swap?
200
Capitalizing on a discrepancy in quoted prices by making a riskless profit.
What is Arbitrage?
300
Statement that says in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.
What is The Law of One Price?
300
When there are no impediments to the free flow of goods and services, and prices reflect all available public information.
What is Efficient Market?
300
Statement that says a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent.
What is The Fisher Effect?
300
Statement that says for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.
What is The International Fisher Effect?
300
The impact on the market in which traders move as a herd in the same direction at the same time.
What is Bandwagon Effect?
400
When the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with the domestic currency.
What is Free Convertibility?
400
When only nonresidents may convert the domestic currency into a foreign currency without any limitations.
What is External Convertibility?
400
This occurs when residents and nonresidents rush to convert their holdings of domestic currency into a foreign currency.
What is Capital Flight?
400
The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values.
What is Transaction Exposure?
400
The impact of currency exchange rate changes on the reported financial statements of a company.
What is Translation Exposure?
500
The extent to which changes in exchange rates affect a firm's future international earning power.
What is Economic Exposure?
500
This practice involves delaying collection of foreign currency receivables if that currency is expected to appreciate and delaying payables if the currency is expected to depreciate.
What is a Lag Strategy?
500
This foreign exchange forecasting practice that relies on variables such as money supply growth, inflation rates, nominal interest rates, and balance-of-payments.
What is Fundamental Analysis?
500
Statement that says the price of a basket of particular goods should be roughly equivalent in each country.
What is Purchasing Power Parity?
500
A practice that involves currency transactions conducted in the spot market to capitalize on a discrepancy in the cross exchange rate between two currencies.