Chapter 9 notes - Chapter 9 The Foreign Exchange Market...

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Chapter 9 The Foreign Exchange Market Foreign exchange market - a market for converting the currency of one country into that of another country Exchange rate - the rate at which one currency in converted into another Foreign exchange risk - the risk that changes in exchange rates will hurt the profitability of a business deal Currency speculation - involves the short term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates Carry trade - 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 Hedging - the process of insuring one’s business against foreign exchange risk by using forward exchanges or currency swaps Spot exchange rate - the exchange rate at which a foreign exchange dealer will convert one currency into another currency on a particular day Forward exchange - when 2 parties agree to exchange currency and execute the deal at some specific date in the future Forward exchange rate - the exchange rate governing forward exchange transactions
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This note was uploaded on 12/04/2011 for the course MKT 310 taught by Professor Tunga during the Summer '10 term at Michigan State University.

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Chapter 9 notes - Chapter 9 The Foreign Exchange Market...

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