Term
| international monetary system |
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Definition
| institutional arrangements countries adopt to govern exchange rates |
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Definition
| a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand |
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Definition
| currency value is fixed relative to a reference currency (i.e. Chinese yuan fixed to USD) |
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Term
| dirty-float system (aka managed-float system) |
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Definition
| a system under which a country's currency is nominally allowed to float freely against other currencies, but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value. |
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Definition
| a system under which the exchange rate for converting one currency into another is fixed. |
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Term
| The Bretton Woods conference |
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Definition
| 1944-New Hampshire w/ 44 countries; created two major international institutions: IMF and World Bank; created fixed exchange rates; failed in 1973. |
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Definition
| the practice of pegging currencies to gold and guaranteeing convertibility |
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Term
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Definition
| the amount of currency needed to purchase one ounce of gold |
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Term
| balance of trade equilibrium |
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Definition
| reached when the income a country's residents earn from exports equals the money residents paid for imports |
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Term
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Definition
| Jan. 1976 meeting of IMF members to revise Articles of Agreement to reflect new floating exchange rates. 1. Floating rates were declared acceptable 2. Gold was abandoned as a reserve asset 3. Total annual IMF quotas were increased to $41B |
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Definition
| means of controlling a countries currency; board decides on exchange rate and some have "peg-adjusted" where exchange rate is pegged but currency board has power to adjust |
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Definition
| arises when people behave recklessly because they know they will be saved if things go wrong (i.e. countrywide, 2007) |
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Term
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Definition
| involves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates. |
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Term
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Definition
| the exchange rate at which a foreign exchange dealer will convert one currency into another that particular day |
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Term
| direct and indirect exchange rate quotations |
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Definition
| direct: 1USD = 1.41EUR indirect: 1EUR = 0.705USD |
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Definition
| investment fund that not only buys financial assets but also sells them short |
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Definition
| occurs when an investor places a speculative bet that the value of a financial asset will decline and profits from that decline |
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Term
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Definition
| when two parties agree to exchange currency and execute a deal at some specific date in the future |
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Term
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Definition
| the purchase of securities in one market for immediate resale in another to profit from a price discrepancy |
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Term
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Definition
| nominal interest rates (i) in each country equal the required real rate of interest (r) and the expected rate of inflation (I) over the time period for which the funds are to be lent. i = r + I |
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Term
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Definition
| residents convert domestic currency into a foreign currency |
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Term
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Definition
| the trade of goods and services for other goods and services |
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Term
| freely convertible currency |
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Definition
| residents and nonresidents allowed to purchase unlimited amounts of foreign currency w/ domestic currency |
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Term
| externally convertible currency |
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Definition
| nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way |
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Term
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Definition
| residents and nonresidents are prohibited from converting their holdings of that currency into another currency (cuba) |
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Term
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Definition
| the extent to which income from individual transactions is affected by fluctuations in the FX market |
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Term
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Definition
| the extent to which the reported consolidated results and balance sheets of a corporation are affected by fluctuations in FX values. |
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Term
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Definition
| the extent to which a firm's future international earning power is affected by changes in exchange rates |
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Definition
| a loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits |
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Term
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Definition
| simultaneous purchase and sale of a given amount of foreign exchange for two different dates |
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Term
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Definition
| in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in the same currency |
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Term
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Definition
| a market where prices reflect all available information |
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Definition
| a market in which prices do not reflect all available information |
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Term
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Definition
draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements; variables include: money supply growth; inflation rates; nominal interest rates; balance-of-payments positions |
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Term
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Definition
| uses prices and volume data to determine past trends which are expected to continue |
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Term
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Definition
| attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate (FROM THE STANDPOINT OF THE COMPANY'S BEST INTEREST) |
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Term
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Definition
| delaying the collection of foreign currency receivables if that currency is expected to appreciate, and delaying the payables if that currency is expected to depreciate (FROM THE STANDPOINT OF THE COMPANY'S BEST INTEREST) |
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Term
| relatively efficient market |
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Definition
| a market where few impediments to international trade and investment exist |
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