Lect09-International Financial Markets-VineyChptr15

thus in this case aud is considered base or product

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Unformatted text preview: ed in 1 unit, we consider it as base ccy “product” and a ccy quoted in split unit, we consider it as term ccy or “money”.. Thus in this case, AUD is considered base or “product” and US$ is term or “money”. It is a AUD market and people are buying or selling AUD as product and using US$ as money or price to buy or sell one unit of AUD.) • Two levels of market: – Retail ~ customers buy/sell forex from dealers. – Wholesale ~ dealers buy/sell forex from other dealers in same country or in other countries. 9 Foreign Exchange Markets Foreign Spot vs Forward Rates • Two key types of foreign exchange rates: – Spot ~ whereby the agreed rate is for an immediate transaction involving the exchange of one currency for another ‘on the spot’ (typically 2 days settlement terms) terms) – Forward ~ whereby the agreed rate is to exchange one currency for another, but at an agreed future date. future 10 Spot Market Quotations Spot • The price of a currency is expressed in terms of another currency • • The first currency mentioned is the price being sought (also ca...
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