Used loosely to describe all private and public sector demand for goods and services produced by a given country. In practice, it is interchangeable with Gross Domestic Product (GDP). Academic notions of aggregate demand make a distinction between short-term and long-term, and are modeled as a function of price levels.
Can very depending on context, but generally defined as the amount of exposure a customer has to the (potential) movement of spot and forward rates.
Measures the total volume of goods and services produced by a given economy. Generally speaking, an increase in demand should lead to an expansion of aggregate supply in the economy. In the event of a mismatch between aggregate supply and aggregate demand, prices would change (i.e. inflation/deflation) in order to return the economy to equilibrium.
A trader that has committed to the existing price in the market.
An archaic term used to describe the difference/premium between the official rate and the market rate.
A vehicle which effectively enables American investors to own shares in foreign corporations. ADRS trade on exchanges like conventional securities. The sponsoring bank collects dividends, pays local taxes and converts them to dollars for distribution to American shareholders. It should be noted that ADRs are affected both by company performance and by changes in exchange rates.
An (currency) option which may be exercised at any time prior to expiration.
An amortising principal is one which decreases during the life of the deal, or is repaid in stages during a loan.
Common term used to describe a currency increasing in value, as a result of market forces as opposed to official adjustment.
An increase in the market value of a currency in terms of other currencies.
Is a simultaneous operation in two different but related markets in order to take advantage of a discrepancy between them which will lock in a certain profit. The arbitrage operation itself will usually tend to cause the different markets to move back in line.Covered interest arbitrage involves either the lending and borrowing of a currency in different centres, or the creation of a borrowing in one currency by borrowing another and converting the currency borrowed by means of a foreign exchange swap deal to produce the required currency at a cheaper rate.
Dealer jargon used to quote the forward premium/discount. For example, “two-two around” would translate into 2 points on either side of the present spot value.
The price at which specific currency or contract can be purchased. In practice, this can be understood as the number on the right side of the quote, which is usually the higher price. For example, in the quote EUR/USD 1.4122/26, the ask price is 1.4126; meaning you can buy one Euro for 1.4126 US dollars. Opposite to bid price.
Investment practice that divides funds among different types of securities/vehicles/markets in order to achieve a return that is calibrated to an investor’s risk profile.
The worldwide affiliation of foreign exchange dealers that together make most of the market for forex trading. Association composed of the three largest future exchanges in the UK.
An type of order to buy or sell at the best rate that is currently available in the market.