Glossary of Forex Terms 2 страница

Counterparty - The other organisation or party with whom the exchange deal is being transacted.

Countervalue - Where a person buys a currency against the dollar it is the dollar value of the transaction.

Country risk - The risk attached to a borrower by virtue of its location in a particular country. This involves examination of economic, political and geographical factors. Various organisations generate country risk tables.

Cover - (1) To take out a forward foreign exchange contract. (2) To close out a short position by buying currency or securities which have been sold.

Covered Arbitrage - Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.

Covered Margin - The interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover.

Crawling peg - A method of exchange rate adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line with certain economic or market indicators.

Credit Risk - Risk of loss that may arise on outstanding contracts should a counter party default on its obligations.

Cross deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.

Cross rates - Rates between two currencies, neither of which is the US Dollar.

Current Account - The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.

Cable - Trader jargon for the British Pound Sterling referring to the Sterling/US Dollar exchange rate. Term began due to the fact that the rate was originally transmitted via a transatlantic cable starting in the mid 1800`s.

Candlestick Charts - A chart that indicates the trading ranges for the day as well as the opening and closing price. If the close price is lower than the open price, the rectangle is shaded or filled. If the open price is higher than the close price, the rectangle is not filled.

Capital Markets - Markets for medium to long term investment (usually over 1 year). These tradable instruments are more international than the ‘money market’ (i.e. Government Bonds and Eurobonds).

Central Bank - A government or quasi-governmental organization that manages a country`s monetary policy a prints a nation’s currency. For example, the US central bank is the Federal Reserve, others include the ECB, BOE, BOJ.

Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements, as well as, aid in technical analysis.

Clearing - The process of settling a trade.

Close a Position (Position Squaring) - To eliminate an investment from one’s portfolio by either buying back a short position or selling a long position.

Commission - Fee broker charges for a transaction.

Confirmation - A document exchanged by counterparts to a transaction that confirms the terms of said transaction.

Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, financial instability in Thailand caused high volatility in its domestic currency, the Baht, which triggered a contagion into other East Asian emerging currencies, and then to Latin America. It is now referred to as the Asian Contagion.

Contract (Unit or Lot) - The standard unit of trading on certain exchanges.

Convertible Currency - A currency which can be exchanged freely for other currencies at market rates, or gold.

Cost of Carry - The cost associated with borrowing money in order to maintain a position. It is based on the interest parity, which determines the forward price.

Counter party - The participant, either a bank or customer, with whom the financial transaction is made.

Country Risk - The risk associated with government intervention (does not include central bank intervention). Examples are legal and political events such as war, or civil unrest.

Credit Checking - Due to the large size of certain financial transactions that change hands, it is essential to check that that the counter parties have room for the trade. Once the price has been agreed the credit is checked. If the credit is bad then no trade takes place. Credit is very important when trading, both in the Inter-bank market and between banks and their customers.

Credit Netting - Arrangements that exist to maximize free credit and speed the dealing process by reducing the need to constantly re-check credit. Large banks and trading institutions may have agreements to net outstanding deals.

Cross Rates - An exchange rate between two currencies. The cross rate is said to be non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/CHF quote would be considered a cross rate, whereas in the UK or Switzerland it would be one of the primary currency pairs traded

Currency - A country’s unit of exchange issued by their government or central bank whose value is the basis for trade.

Currency Risk - The risk of incurring losses resulting from an adverse change in exchange rates.

Cable - A term used in the foreign exchange market for the US Dollar/British Pound rate.

Capital Risk - The risk arising from a bank having to pay to the counter party with out knowing whether the other party will or is able to meet its side of the bargain. see Herstatt.

Carry - The interest cost of financing securities or other financial instruments held.

Cash Delivery - Same day settlement.

Cash market - The market in the actual financial instrument on which a futures or options contract is based.

Cash - normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same day deals.

Cash and Carry - The buying of an asset today and selling a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.

Cash Settlement - A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.

Central Bank - A nations main regulatory bank. Traditionally, its primary responsibility is development and implementation of monetary policy.

Central Rate - Exchange rates against the ECU adopted for each currency within the EMS.Currencies have limited movement from the central rate according to the relevant band.

Chartist - An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.

Clean float - An exchange rate that is not materially effected by official intervention.

Closed position - A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.

Commission - The fee that a broker may charge clients for dealing on their behalf.

Confirmation - A memorandum to the other party describing all the relevant details of the transaction.

Contract - An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract).

Conversion Account - A general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as Position Accounts.

Conversion - The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.

Conversion arbitrage - A transaction where the asset is purchased and buys a put option and sells a call option on the asset purchased, each option having the same exercise price and expiry.

Convertible currency - A currency that can be freely exchanged for another currency (and or gold) without special authorization from the central bank.

Copey - Slang for the Danish krone.

Correspondent Bank - The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.

Counterparty - The other organisation or party with whom the exchange deal is being transacted.

Countervalue - Where a person buys a currency against the dollar it is the dollar value of the transaction.

Country risk - The risk attached to a borrower by virtue of its location in a particular country. This involves examination of economic, political and geographical factors. Various organisations generate country risk tables.

Cover - (1) To take out a forward foreign exchange contract. (2) To close out a short position by buying currency or securities which have been sold.

Covered Arbitrage - Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.

Covered Margin - The interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover.

Crawling peg - A method of exchange rate adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line with certain economic or market indicators.

Credit Risk - Risk of loss that may arise on outstanding contracts should a counter party default on its obligations.

Cross deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.

Cross rates - Rates between two currencies, neither of which is the US Dollar.

Current Account - The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.

-D-

Day Trading:Opening and closing the same position or positions within the same trading session.

Dealer: One who acts as a principal or counterpart to a transaction; places the order to buy or sell.

Deficit: A negative balance of trade (or payments); expenditures are greater than income/revenue.

Delivery: An actual delivery where both sides transfer possession of the currencies traded.

Deposit: The borrowing and lending of cash. The rate that money is borrowed/lent at is known as the deposit rate (or depo rate). Certificates of Deposit (CD`S) are also tradable instruments.

Depreciation: A decline in the value of a currency due to market forces.

Derivatives: Trades that are constructed or derived from another security (stock, bond, currency, or commodity). Derivatives can be both exchange and non-exchange traded (known as Over the Counter or OTC). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.

Devaluation: The deliberate downward adjustment of a currency`s value versus the value of another currency normally caused by official announcement.

Day trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

Deal date - The date on which a transaction is agreed upon.

Deal Ticket - The primary method of recording the basic information relating to a transaction.

Dealer - One who, as opposed to a broker, acts as a principle in all transactions, buying and selling for its own accounts.

Deflator - Difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.

Delivery date - The date of maturity of the contract, when the exchange of the currencies is made This date is more commonly known as the value date in the FX or Money markets.

Delivery Risk - A term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.

Depreciation - A fall in the value of a currency due to market forces rather than due to official action.

Desk - Term referring to a group dealing with a specific currency or currencies.

Details - All the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.

Devaluation - Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.

Direct quotation - Quoting in fixed units of foreign currency against variable amounts of the domestic currency.

Dirty Float - Floating a currency when the rate is controlled by intervention by the monetary authorities.

Day Trading - Opening and closing the same position or positions within the same trading session.

Dealer - One who acts as a principal or counterpart to a transaction; places the order to buy or sell.

Deficit - A negative balance of trade (or payments); expenditures are greater than income/revenue.

Delivery - An actual delivery where both sides transfer possession of the currencies traded.

Deposit - The borrowing and lending of cash. The rate that money is borrowed/lent at is known as the deposit rate (or depo rate). Certificates of Deposit (CD`S) are also tradable instruments.

Depreciation - A decline in the value of a currency due to market forces.

Derivatives - Trades that are constructed or derived from another security (stock, bond, currency, or commodity). Derivatives can be both exchange and non-exchange traded (known as Over the Counter or OTC). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.

Devaluation - The deliberate downward adjustment of a currency`s value versus the value of another currency normally caused by official announcement.

Day trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

Deal date - The date on which a transaction is agreed upon.

Deal Ticket - The primary method of recording the basic information relating to a transaction.

Dealer - One who, as opposed to a broker, acts as a principle in all transactions, buying and selling for its own accounts.

Deflator - Difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.

Delivery date - The date of maturity of the contract, when the exchange of the currencies is made This date is more commonly known as the value date in the FX or Money markets.

Delivery Risk - A term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.

Depreciation - A fall in the value of a currency due to market forces rather than due to official action.

Desk - Term referring to a group dealing with a specific currency or currencies.

Details - All the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.

Devaluation - Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.

Direct quotation - Quoting in fixed units of foreign currency against variable amounts of the domestic currency.

Dirty Float - Floating a currency when the rate is controlled by intervention by the monetary authorities

-E-

Economic Indicator: A statistic that indicates current economic growth and stability issued by the government or a non-government institution (i.e. Gross Domestic Product (GDP), Employement Rates, Trade Deficits, Industrial Production, and Business Inventories).

Efficient Market: A market in which the current price reflects all available information from past prices and volumes.

End Of Day (or Mark to Market): Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader`s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.

Estimated Annual Income: Projected yearly earnings.

Euro: The currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU).

European Central Bank: The Central Bank for the European Monetary Union.

European Monetary Unit: The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. Currently, the Euro exists only as a banking currency and for paper financial transactions and foreign exchange. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

Exchange Rate Risk: See Currency Risk.

Economic Exposure: The risk on a company’s cash flow stemming from foreign exchange fluctuations.

Easing - Modest decline in price.

Economic Indicator - A statistics which indicates current economic growth rates and trends such as retail sales and employment.

ECU - European Currency Unit.

EDI - Electronic Data Interchange.

Effective Exchange Rate - An attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.

EFT - Electronic Fund Transfer.

EMS - European Monetary System.

European Monetary System - A system designed to stabilize if not eliminate exchange risk between member states of the EMS as part of the economic convergence policy of the EU. It permits currencies to move in a measured fashion (divergence indicator) within agreed bands (the parity grid) with respect to the ECU and consequently with each other.

Exchange control - Rules used to preserve or protect the value of a countries currency.

Exotic - A less broadly traded currency.

Exposure - In foreign exchange, a potential for gain or loss because of movement in foreign exchange rate. There are three primary types of exposure:

1. Economic: The change in future earning power and cash flow arising from a change in exchange rates. In effect, it represents a change in the value of a company holding foreign currency.
2. Transnational: A potential gain or loss arising from transactions that will definitely occur in the future, are currently in progress, or could have already been completed. A signed but not shipped sales contract, a receivable or foreign currency payment collected but not converted to local currency would all be examples of transaction exposure.
3. Translation: The potential for change in reported earnings and/or the book value of the consolidated company equity accounts, as the result of a change in foreign exchange rates used to translate the foreign currency statements of subsidiaries and affiliates known as accounting exposure.

Economic Indicator - A statistic that indicates current economic growth and stability issued by the government or a non-government institution (i.e. Gross Domestic Product (GDP), Employement Rates, Trade Deficits, Industrial Production, and Business Inventories).

Efficient Market - A market in which the current price reflects all available information from past prices and volumes.

End Of Day (or Mark to Market) - Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader`s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.

Estimated Annual Income - Projected yearly earnings.

Euro - The currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU).

European Central Bank - The Central Bank for the European Monetary Union.

European Monetary Unit - The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. Currently, the Euro exists only as a banking currency and for paper financial transactions and foreign exchange. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

Exchange Rate Risk - See Currency Risk.

Economic Exposure - The risk on a company’s cash flow stemming from foreign exchange fluctuations.

Easing - Modest decline in price.

Economic Indicator - A statistics which indicates current economic growth rates and trends such as retail sales and employment.

ECU - European Currency Unit.

EDI - Electronic Data Interchange.

Effective Exchange Rate - An attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.

EFT - Electronic Fund Transfer.

EMS - European Monetary System.

European Monetary System - A system designed to stabilize if not eliminate exchange risk between member states of the EMS as part of the economic convergence policy of the EU. It permits currencies to move in a measured fashion (divergence indicator) within agreed bands (the parity grid) with respect to the ECU and consequently with each other.

Exchange control - Rules used to preserve or protect the value of a countries currency.

Exotic - A less broadly traded currency.

Exposure - In foreign exchange, a potential for gain or loss because of movement in foreign exchange rate. There are three primary types of exposure:

1. Economic: The change in future earning power and cash flow arising from a change in exchange rates. In effect, it represents a change in the value of a company holding foreign currency.
2. Transnational: A potential gain or loss arising from transactions that will definitely occur in the future, are currently in progress, or could have already been completed. A signed but not shipped sales contract, a receivable or foreign currency payment collected but not converted to local currency would all be examples of transaction exposure.
3. Translation: The potential for change in reported earnings and/or the book value of the consolidated company equity accounts, as the result of a change in foreign exchange rates used to translate the foreign currency statements of subsidiaries and affiliates known as accounting exposure.

-F-

Federal Deposit Insurance Corporation (FDIC):The regulatory agency responsible for administering bank depository insurance in the US.

Federal Reserve (Fed): The Central Bank of the United States.

Fixed Exchange Rate: An official exchange rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates fluctuate between definite upper and lower bands, leading to intervention.

Fixed Interest: This type of transaction pays an agreed interest rate that remains constant for the term of the deal. Fixed interests are many times found in bonds, as well as, a fixed rate mortgage.

Flat (or Square): To be neither long nor short is the same as to be flat or square. One would have a flat book if he has no positions or if all the positions cancel each other out.

Floating Rate Interest: As opposed to a fixed rate, the interest rate on this type of deal will fluctuate with market rates or benchmark rates. One example of a floating rate interest is a standard mortgage.

Foreign Exchange (or Forex or FX): The simultaneous buying of one currency and selling of another in an over-the-counter market. Most major FX is quoted against the US Dollar.

Foreign Exchange Risk - See Currency Risk

Forward: A deal that will commence at an agreed date in the future. Forward trades in FX are usually expressed as a margin above (premium) or below (discount) the spot rate. To obtain the actual forward FX price, one adds the margin to the spot rate. The rate will reflect what the FX rate has to be at the forward date so that if funds were re-exchanged at that rate there would be no profit or loss (i.e. a neutral trade). The rate is calculated from the relevant deposit rates in the 2 underlying currencies and the spot FX rate. Unlike in the futures market, forward trading can be customized according to the needs of the two parties and involves more flexibility. Also, there is no centralized exchange.

Forward Points: The pips added to or subtracted from the current exchange rate to calculate a forward price.

Forward Rate Agreements (FRA`s): FRA`s are transactions that allow one to borrow/lend at a stated interest rate over a specific time period in the future.

Front and Back Office: The front office usually comprises of the trading room and other main business activities.

Fundamental Analysis: Thorough analysis of economic and political data with the goal of determining future movements in a financial market.

Futures: A way of trading financial instruments, currencies or commodities for a specific price on a specific date in the future. Unlike options, futures give the obligation (not the option) to buy or sell instruments at a later date. They can be used to both protect and to speculate against the future value of the underlying product.

Fast market - Rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported.

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