Explain the result of a forward transaction

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Reference no: EM131862949

Topics

Characteristics of the currency market and of securities that trade in it

Describe characteristics and structure of the currency market (its locations, participants - interbank, wholesale and retail segments, settlement mechanisms, etc.)

Describe characteristics of currency-related trades securities (spot transactions, forward transactions, fx swap, and currency options)

Quotes and transactions

Interpret the bid and ask quotes for a currency

Calculate the outcome when converting one currency to another

Forward exchange rates

Interpret forward quotes for a currency

Explain the result of a forward transaction.

Implied cross rates

Calculate the implied cross rates for which one currency trades for another in the NY currency market.

Arbitrage

Understand what is required for an arbitrage opportunity to exist

Be able to identify arbitrage opportunities in:

Inter-dealer arbitrage

Triangular arbitrage

Covered interest arbitrage

Explain what trades must occur for a trader to take advantage of an identified arbitrage opportunity and determine the profitability of the trade

Theories of currency value

Be able to explain the three theories of currency value

Flow theory

Stock theory

Asset theory

and identify implications of each for expected change in a currency's value

Balance of payments

Understand the information provided by a country's balance of payments statement

Reference no: EM131862949

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