Pips & points: A point is a unit of decimal, the fourth place to the right of the decimal (0.0001) whereas a pip is the fifth place to the right (0.0001). One point is one ten thousandth of a dollar thus, 100 points become one cent. Which decimal place is implied by a point varies… Read More »
Online Beginners Start small and spend less. Choose Your Domain Name Every website starts with a great domain name. What is a domain name? What is a TLD? Think of your domain name as a street address. If people search for your domain, they will be able to find your website. Every website on the internet has… Read More »
There may be situations wherein counter-parties to the underlying trading contracts may insist that importers or exporter provide guarantees of highly reliable third parties about the ability of the importers or exporters to complete the underlying contracts, and the event of failure of the importers or exporters to do so, pay compensation to the counter-parties.… Read More »
There are two basic types of options: Put Option and Call Option CALL OPTION: This option gives the buyer the right to purchase or “call away” a specified amount of the underlying foreign currency at a specified price up to a specified date. The price at which the foreign currency may be bought is the… Read More »
We have examined the two main methods of covering an exchange rate fluctuations risk i.e. The traditional forward exchange contract, and The currency futures contract. An option is an agreement between two parties. One party grants the other the right to buy or sell an instrument under certain conditions. The instruments may be a stock,… Read More »
Mechanics of buying and selling foreign currency future Foreign Exchange Futures: Let us assume that in January an importing firm requires Swiss Franc 125,000 in three-month time. It purchases a SF12500 future contract through a broker at the rate of SF1 = $0.6600. the contract’s current value would be ($0.66SF SF125000) U.S, $82500. It would… Read More »
These are the markets that were “derived” from other markets. The first financial future contracts were derived from the foreign exchange market. A financial future contract is a contract to deliver or take delivery of a financial instrument at a future date. In some cases where delivery is difficult, the contract may be settled by… Read More »
In spot transactions, settlements are effected within two working days of striking the deal. Although both payments are to be made simultaneously, because of geographical distance, the differing timing zones and the technicalities of the respective clearing systems, it is only possible to ascertain on the following day whether payment has actually been made by… Read More »
Forward contracts versus Future contracts Commodity brokers use forward and futures contracts for which reason? Points of difference between forward contracts and financial futures are as under: Forward contracts are available in any amount, small or large, whereas financial future contracts are in standard size. Forward contracts are meant for bonafide trade transactions whereas in… Read More »
Correspondent Banking The term “correspondent banking” is defined as informal arrangement whereby a smaller bank maintains deposit balances with larger banks in nearby cities and looks to them for a wide variety of services and assistance. Another writer has described “Correspondent Banking” as an informal linkage between banks in different countries set up when banks… Read More »