Question

In: Finance

Briefly describe the global market for spot and forward currency transactions. Address industry concentration, geographic dimensions,...

Briefly describe the global market for spot and forward currency transactions. Address industry concentration, geographic dimensions, market size and efficiency and other factors you consider important.

Solutions

Expert Solution

Spot markets are those markets in which transaction are conducted instantly and they are also delivered instantly

Forward currency transactions are those transactions in which currency transactions are carried at current dates and deliveries to be made at the future dates.

Spot and forward currency transactions in global market are important in order to determine the rates of various currencies and it is also needed in order to speculate the rates of various currencies in future.

There are various important factors in determining the overall currency exchange rates in the global markets which would be like industry concentration as it will help to determine the scope of work concentrated in a country in the major industries.

market size of another country's also important in order to determine the exchange currency rates as it will help in deciding upon whether it is a developed market or developing market.

Efficiency is another factor which will be determining because the active participation of the various market participants will help in efficient price discovery.

this will be the factors along with interest rates and inflation and regulatory authorities which will determine the fair rate mechanism through spot and forward currency exchange rates.


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