a. Define the term Foreign Exchange Market. Discuss three
participants in this market and the reasons for their
participation.
b. Compare and contrast Spot exchange and Forward exchange
rates. Discuss how a company may use a forward exchange rate
contract to facilitate an international purchase transaction.
c. “Companies must consider Exchange Rate Risk related to
International Trade Contracts”. Discuss and analyze this quote.
Identify the five broad categories of institutional participants
that operate in the foreign exchange market. Discuss the role
played by each one of them in the forex market.
Define a forward transaction in the foreign exchange market and
give an example of how it is used. Define a swap transaction in the
foreign exchange market and give an example of how it is used.
Discuss the linkages between the money market and the foreign
exchange market in both the short and long-run? (You should use
(lots of) graphs in this question)
The foreign exchange market is a market in which foreign
exchange transactions take place. The Primary function of a foreign
exchange market is the transfer of purchasing power from one
country to another and from one currency to another. The
international clearing function performed by foreign exchange
markets plays a very important role in facilitating international
trade and capital movement. Certain important types of transactions
conducted in the foreign exchange market occurs via the Spot and
Forward markets.
Describe the...
Geography and the Foreign Exchange Market
a. What is the geographical location of the foreign
exchange market?
b. What are the two main types of trading systems for
foreign exchange?
c. How are foreign exchange markets connected for
trading activities?
International companies use the foreign exchange market for the
following reasons EXCEPT _________.
b.they must pay a foreign company for its products or services
in its country’s currency
c.they have spare cash that they wish to invest for short terms
in money markets
d. they use the money to invest in US savings bonds
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A currency swap is the simultaneous purchase and sale of a given
amount of foreign exchange for two different value dates
Swaps are transacted for...