Foreign Exchange Market

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Foreign Exchange Market by Mind Map: Foreign Exchange Market

1. Geographical Extent of FEM

1.1. Major world trading each morning moves from East to West

1.2. Major currency trading centers

1.2.1. London, New York, Tokyo

1.3. Leading suppliers of foreign exchange rate info and trading system

1.3.1. Reuters, Telerate, Bloomberg

2. Functions of Foreign Exchange Market

2.1. Transfer of purchasing power

2.2. Source of credit

2.3. Transferring foreign exchange risk

2.3.1. Transferring foreign exchange risk

3. Market principants

3.1. 2 Tiers

3.1.1. The interbank of wholesale market

3.1.2. The client of retail market

3.2. 4 Categories of principants

3.2.1. Bank and nonbank foreign exchange dealers

3.2.2. Individuals and firms

3.2.2.1. Importers and exporters, international portfolio investors, MNEs, tourists and others use the foreign exchange market to facilitate execution of commercial or investment transactions.

3.2.3. Speculators and Arbitragers

3.2.4. Central Banks and Treasures

4. Transactions in the Interbank Market

4.1. Spot Transactions

4.1.1. Is the purchase of foreign exchange, with delivery and payment between banks to take place on the second following business day.

4.1.2. The date of settlement is referred to as the value date. Settled through CHIPS in the NY

4.2. Outright Forward Transactions

4.2.1. Requiers delivery at a future value date of a specified amount of one currency for a specified amount of another currency

4.3. Swap Transactions

4.3.1. Is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates

4.4. Forward-Forward swaps

4.5. Nondeliverable Forwards

5. Size of the Market

5.1. Spot transactions grew from $621 billion per day in 20014 to $1,005 billion in 2007, an increase of 62%

5.2. Outright forward transactions grew from $208 billion per day in 2004 to $363 billion in 2007, an increase of 74%

5.3. Swap transactions grew from $944 billion per day in 2004 to more than $1,714 billion in 2007, an increase of 82%

6. Foreign Exchange Rates & Quotations

6.1. Rates

6.1.1. Cross Rates

6.2. Quotations

6.2.1. Interbank Quotations

6.2.2. Direct and Indirect Quotations

6.2.3. Bid and Ask Quotations

7. Information