Some Basic Definitions And Questions

It is a medium of exchange, coins or notes, used to buy goods or services. Most countries have their own currency, issued by an official agency called a central bank or a monetary authority. It is the ratio used to convert one currency into another. A rate of 2.2900 for GBP CHF signifies that one pound is worth 2.290 Swiss Francs, or that one pound will buy 2.29 Swiss Francs. A currency that can be freely bought or sold with no restrictions, or very few restrictions. Most currencies in the...

The Gold Exchange Standard

To escape the danger of the devaluation revaluation inflation cycle experienced in the interwar years, the US and the UK tried to create a 'free, stable, and multilateral monetary system'. This became known as the Bretton Woods agreement, named after the location where the agreement was signed in Bretton Woods, New Hampshire. Proposed by the Americans and accepted in July 1944, it created a monetary system resembling the original Gold Standard concept. At the same time the International...

Fx As A Contract For Difference

This is the newest route to the FX market for the retail investor. Contracts for difference CFDs became popular in the late 1990s as a vehicle to allow individuals to margin-trade on individual equities without having to pay stamp duty. The concept is simple. For example, an investor wishing to speculate on BP would open a CFD with a broker, put down a 10 margin and then pay or receive funding for as long as the position remained open. When he came to close the position, he would pay or receive...

Introduction

Foreign exchange can be bought or sold by many different market participants using many different currencies in most countries around the world. It can be bought or sold value spot, which, as we saw in the previous chapter, generally means a two-business-day value period, or it can be transacted for delivery on a future date, in which case it is a forward transaction. As Continuous Linked Settlement CLS continues to make inroads into the FX market, the two-business day settlement period may...