Large market 32 trillion traded per day april 2007

This preview shows page 1 - 2 out of 2 pages.

Over-the-counter trading (OTC) - bilaterally between two parties. Large market $3.2 trillion traded per day (April 2007) Main centers account for more than 50% of transactions: London, New York, and Tokyo Trades spread over most time zones Transaction Costs Costs associated with conducting trades in a market. Spread Difference between the “buy at” and “sell for” prices. Example of a market friction or transaction cost that create a wedge between the price paid by the buyer and the price received by the seller. Reflects intermediaries standing between the individual seeking to exchange currency and the foreign exchange market. Spreads are larger for individuals than they are for banks and corporations involved in large-volume transactions. The Spot Contract How the spot contract works: A and B agree to trade one currency for another for delivery on the spot at set price. The price they agree upon is known as the spot exchange rate. Characteristics of the spot market Default risk very low; settlement is now nearly instantaneous. Most common type of trade, accounting for nearly 90% of all foreign exchange market transactions. Personal transactions account for a very small share of total transactions.
Image of page 1

Subscribe to view the full document.

Image of page 2
You've reached the end of this preview.
  • Spring '10
  • BALLIE
  • Exchange Rate, Foreign exchange market, exchange rate regimes, The Market for Foreign Exchange

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern