Wk12_3Nov_Ch17_FXMkt

Wk12_3Nov_Ch17_FXMkt - Week 12 (Thursday, 11/3/2011)...

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Week 12 (Thursday, 11/3/2011) Chapter 17 The Foreign Exchange Market
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Outline The foreign exchange market Definition The participants The basics of exchange rates Definition Depreciation, appreciation Devaluation, revaluation Spot and Forward Markets Spot exchange rate Forward exchange rate Forward premium and discount
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Foreign Exchange (FX) Market The FX market is the market in which national moneys are traded for other national moneys. Two currencies are involved Nearly all transactions consist of the exchange of bank deposits. CitiBank Deutsche Bank
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The Participants 1. Commercial banks and other depository institutions: transactions involve buying/selling of deposits in different currencies for investment purposes. 2. Non-bank financial institutions (mutual funds, hedge funds, securities firms, insurance companies, pension funds) may buy/sell foreign assets for investment. 3. Non-financial businesses (e.g., multinational companies) conduct foreign currency transactions to buy/sell goods, services and assets. 4. Central banks: conduct official international reserves transactions.
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Wells Fargo Insurance Cos. Regional Banks Mutual Funds Hedge funds Citibank, Bank of America NEW YORK Barclays, LONDON Approximately 20 large banks dominate the interbank market $1 million is smallest transaction Large Customers: Ford, GM, Shell, BP and other large multinationals
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Commercial Banks ‘Rule’ Buying and selling in the foreign exchange market are dominated by commercial and investment banks.
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This note was uploaded on 01/28/2012 for the course ECN 306 taught by Professor Croucher during the Fall '08 term at ASU.

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Wk12_3Nov_Ch17_FXMkt - Week 12 (Thursday, 11/3/2011)...

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