Term
| "beggar-thy-neighbor" devaluation |
|
Definition
| A devaluation that is designed to cheapen a nation's currency and thereby increase its exports at others' expense and reduce imports. Such devaluations often led to trade wars. |
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Term
| Bank of International Settlements (BIS) |
|
Definition
| Organization headquartered in Basel that acts as the central bank for the industrial countries' central banks. The BIS helps central banks manage and invest their foreign exchange reserves and also holds deposits of central banks so that reserves are readily available |
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Term
|
Definition
| The agreement that outlined the Brenton Woods system developed at the Brenton Woods Conference in 1944 |
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Term
|
Definition
| International monetary system established after WWII under which each government pledged to maintain a fixed or pegged exchange rate for its currency vis-à-vis the dollar or gold. As one ounce of gold was set equal to $35, fixing a currency's gold price was equivalent to setting its exchange rate relative to the dollar. The U.S. government pledged to maintain convertibility of the dollar into gold for foreign official institutions |
|
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Term
| Capital Asset Pricing Model (CAPM) |
|
Definition
| a model for pricing risk. The CAPM assumes that investors must be compensated for the time value of money plus systematic risk as measured by and asset's beta |
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Term
|
Definition
| aka European Community- the group of countries in Europe under the EMS in 1979 |
|
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Term
|
Definition
| the central bank for the European Monetary Union. It has the sole power to issue a single European currency called the Euro |
|
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Term
|
Definition
| aka Common Market- the group of countries in Europe under the EMS in 1979 |
|
|
Term
| European Currency Unit (ECU) |
|
Definition
| A composite currency, consisting of fixed amounts of 13 European currencies |
|
|
Term
| European Monetary System (EMS) |
|
Definition
| Monetary system formed by the major European Countries under which the members agreed to maintain their exchange rates within a specific margin around agreed-upon fixed central exchange rates. These central exchange-rates were denominated in currency units per ECU |
|
|
Term
| European Monetary Union (EMU) |
|
Definition
| 15 members of the European Union that have joined together to establish a single central bank (the European Central Bank) that issues a common currency (usually referred to as the euro). |
|
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Term
|
Definition
| Organization of 15 European nations whose purpose is to promote economic harmonization and tear down barriers to trade and commerce within Europe. |
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Term
| Financial Accounting Standards Board |
|
Definition
| organization in the US that sets the rules that govern the presentation of financial statements and resolves other accounting issues |
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Term
|
Definition
| states that the nominal interest differential between two countries should be equal to the inflation differential between those two countries |
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Term
|
Definition
| United States, France, Japan, Great Britain, and Germany |
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Term
|
Definition
| United States, France, Japan, Great Britain, Italy, Canada, and Germany |
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|
Term
| International Bank for Reconstruction and Development (World Bank) |
|
Definition
| The IBRD is owned by its member nations and makes loans at nearly conventional terms to countries for projects of high economic priority |
|
|
Term
| International Monetary Fund (IMF) |
|
Definition
| International organization created at Brentton Woods, N.H. in 1944 to promote exchange rate stability, including the provision of temporary assistance to member nations trying to defend their currencies against transitory phenomena. |
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Term
|
Definition
| Theory that says a country's trade deficit will initially worsen after its currency depreciates because higher prices on foreign imports will more than offset and reduce volume of imports in the short run |
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Term
|
Definition
| Named for the Paris landmark where it was negotiated, this accord called for the G-7 nations to support the falling dollar by pegging exchange rates within a narrow, undisclosed range, while they also moved to bring their economic policies back into line. |
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Term
|
Definition
| Tough standards on inflation, currency stability, and deficit spending established in the Maastricht Treaty that European nation must meet in order to join the EMU |
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Term
|
Definition
| Agreement under the EC nations would establish a European Monetary Union with a single central bank having the sole power to issue a single European currency called the Euro. |
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Term
|
Definition
| A coordinated program agreed to in September of 1985 that was designed to force down the dollar against other major currencies and thereby improve American competitiveness |
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Term
|
Definition
| After the currency turmoil of August 1971, the United States agreed in December 1971 to devalue the dollar to 1/38 of and ounce of gold, and other countries agreed to revalue their currencies by negotiated amounts vis-à-vis the dollar |
|
|
Term
| Special Drawing Right (SDR) |
|
Definition
| A new form of international reserve assets, created by the IMF in 1967, whose value is based on a portfolio of widely used currencies |
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|
Term
| Stability and Growth Pact |
|
Definition
| restrictions on budget deficits and debt in the Maastricht Criteria designed to prevent governments from undermining the Euro |
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|
Term
| Statement of Financial Accounting Standards No. 133 (FASB 133) |
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Definition
| statement issued by FASB that establishes accounting and reporting standards for derivative instruments and for hedging activities that US firms must use |
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|
Term
| Statement of Financial Accounting Standards No. 52 (FASB 52) |
|
Definition
| this is the currency translation standard currently in use by US firms. It basically mandates the use of current rate method |
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Term
|
Definition
| when one country has an advantage over another country in producing more than one product (e.g. it cost the US 2units/ton of coal and 3units/ton of wheat compared to the UK with 3units/ton of coal and 4 units/ton of wheat. So there is no incentive to trade wheat and coal) |
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|
Term
|
Definition
| the change in the value of a firms foreign-currency-denominated accounts resulting from a change in the exchange rates |
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Term
|
Definition
| when a floating currency gains value |
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Term
|
Definition
| traditionally defined as the purchase of assets or commodities on the market for immediate resale on anotehr in order to profit from a price discrepancy |
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Term
|
Definition
| simultaneous purchase and sale of the same assets or commodities on different markets to profit from price discrepancies |
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|
Term
| arbitrage pricing theory (APT) |
|
Definition
| similar to CAPM the APT is a security pricing model based on risk and return, and it states that securties should fall into a certain line with slope beta and when they diverge form that line arbitrage will bring them back into the line |
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Term
|
Definition
| price at which a dealer is willing to sell foreign exhange |
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|
Term
|
Definition
| exchange rate between 2 currencies represents the price that just balances the relative supplies of, and demands for, assets denominated in those currencies |
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Term
|
Definition
| strict financial policies on reduced government spending and increased taxes that can lead to devaluation |
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Term
|
Definition
| net value of all economic transactions -- including trade in goods and services, transferpayments, loans, and investements--- between residents of the same country and those of all other countries |
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Term
|
Definition
| focuses on transactions considered to be fundemental to the economic health of a currency |
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Term
|
Definition
| price at which a dealer is willing to buy foreign exhange |
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|
Term
| black-market exchange rate |
|
Definition
| an alternative forecasting approach in a controlled environment, as useful indicator of devaluation pressure on the nation's currency |
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Term
|
Definition
| net result of public and private international investment and lending activities |
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|
Term
| capital market imperfections |
|
Definition
| distortions in the pricing of risk, usually attributable to government regulations and asymmetries in the tax treatment of different types of investment income |
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|
Term
| capital market integration |
|
Definition
| real interest rates are determined by the global supply and global demand for funds |
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|
Term
| capital market segmentation |
|
Definition
| real interest rates are determined by local credit conditions |
|
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Term
|
Definition
| involves borrowing a currency bearing a low interest rate and investing the proceeds in a currency bearing a high interest rate |
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|
Term
|
Definition
| A nation's official monetary authority. Its job is to use the instruments of monetary policy (sole power to create money), to achieve: price stability, low interest rates, and or a target currency value |
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Term
|
Definition
| method of technical analysis that examine bar charts or use more sophisticated computer-based extrapolation techniques to fnd recurring price patterns |
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Term
|
Definition
| aka free float- An exchange rate system characterized by the absence of government intervention. |
|
|
Term
|
Definition
| when nation A can produce goods with a higher relative efficiency than nation B then that nation A has a comparative advantage in producing those goods over nation B (e.g. it cost the US 2units/ton of coal and 3units/ton of wheat compared to the UK with 1unit/ton of coal and 4 units/ton of wheat. So there is an incentive to trade wheat and coal because the US hase a comparative advantage in wheat production and UK has a comparative advantage in coal production ) |
|
|
Term
|
Definition
| those risk exposures arising from competition with firms based in other currencies and can't be dealt with soleyly through financial hedging |
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Term
|
Definition
| The terms under which the IMF made loans requiring the borrower to implement certain policy changes that will allow them to achieve self-sustaining economic growth |
|
|
Term
| covered interest arbitrage |
|
Definition
| movement from one market to another to take advantage of a covered interest differential |
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|
Term
| covered interest differential |
|
Definition
| difference between domestic interest rate and the hedged foreign rate |
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Term
|
Definition
| the constant change in the market "out with the old in with the new" (e.g. opening new stores, new businesses, businesses going bust, tearing down old buildings) |
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|
Term
|
Definition
| hedging exposure in one currency by the uses of futures or other contracts on a second currency that is correlated with the first |
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Term
|
Definition
| system in which there is no central bank. Instead, the currency board issues notes and coins that are convertible on demand and at a fixed rate into a foreign reserve currency. |
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|
Term
|
Definition
| a financial contract that gives the buyer the right, but not the obligation, to buy a specified number of units of foreign currency from the option seller at a fixed dollar price up to the options expiration date |
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Term
|
Definition
| a contract that provides protection against currency moves outside an agreed-upon range. It can be created by simultaneously buying an out of the money put option and selling an out of the money call option of the same size. In effect the purchase of the put option is financed by the sale of the call option |
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|
Term
|
Definition
| Is only consistently profitably if you can do one of the following: 1.)have exclusive use of a superior forecasting model 2)have consistent access to information before other investors 3) exploit small temporary deviations from equilibrium 4) can predict the nature of government intervention in the FX market |
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Term
|
Definition
| currency in which a transaction is stated |
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|
Term
| currency of determination |
|
Definition
| currency whose value determines a given price |
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|
Term
|
Definition
| a financial contract that buyer the right, but not the obligation, to buy or sell a specified number of units of foreign currency from the option seller at a fixed dollar rate up to the option's expiration date |
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|
Term
|
Definition
| a financial contract that gives the buyer the right, but not the obligation, to sell a specified number of units of foreign currency to the option seller at a fixed dollar rate up to the option's expiration date |
|
|
Term
|
Definition
| an agreement by the parties in the transactionto share the currency risk associated with the transaction. The arrangement involves a customized hedge contract embedded in the underlying transaction. |
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|
Term
|
Definition
| net flow of goods, services, and unilateral transactions between two countries |
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Term
|
Definition
| exchange rate in effect today |
|
|
Term
|
Definition
| under this currency translation method, all foreign currency balance-sheet and income items are translatedat the current exchange rate |
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|
Term
| current/noncurrent method |
|
Definition
| under this currency translation method, all of a foreign subsidiary's current assets and liablities are translated into home currency at the current market exchange rate, where as noncurrent assets and liabilities are translated at the historical exchange rate (i.e. at the rate in effect at the time the asset was acquired or the liability was incurred) |
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Term
|
Definition
| the payoff profile of a currency collar created through a combined put purchase and call sale |
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Term
|
Definition
| when a floating currency loses value |
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|
Term
|
Definition
| decrease in stated par value of a pegged currency |
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|
Term
|
Definition
| products that are substantially different from competitors and therefore can more easily maintain its domestic currency prices both at home and abroad |
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Term
|
Definition
| investments in which management control is exerted, defined under US rules as ownership of at least 10% of the equity |
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Term
|
Definition
| aka managed float- this is a system of floating exchange rates with central bank intervention to reduce currency fluctuations |
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|
Term
|
Definition
| complete replacement of the local currency with the U.S. dollar |
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|
Term
|
Definition
| the extent to which the value of a firm will change because of an exchange rate change |
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|
Term
|
Definition
| the extent to which the value of the firm will change because of an exchange rate change |
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Term
|
Definition
| situation in which increasing production leads to a less-than-proportionate increase in cost |
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|
Term
|
Definition
| one in which new information is readily incorporated in the prices of traded securities |
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|
Term
| equilibrium exchange rate |
|
Definition
| point at which supply and demand curves intersect |
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|
Term
|
Definition
| currency created by the members of the European Monetary Union and issued by the European Central Bank |
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|
Term
|
Definition
| price of one nation's currency in terms of another currency |
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|
Term
|
Definition
| the variability of a firm's or asset's value that is due to uncertain exchange rate changes |
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|
Term
| exchange-rate mechanism (ERM) |
|
Definition
| Arrangement at the heart of the European Monetary System that allowed each member of the EMS to determine a mutually agreed-on central exchange rate for its currency each rate was denominated in currency units per ECU. |
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|
Term
|
Definition
| offsetting exposures in one currency with exposures in the same or another currency where exchange rates are expected to move in such a way that losses(gains) on the first exposed position should be off-set by gains(losses) on the second currency exposure |
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Term
|
Definition
| nonconveertible paper money |
|
|
Term
|
Definition
| Nonconvertiable paper money |
|
|
Term
|
Definition
| shows public and private investment and lending activities |
|
|
Term
|
Definition
| a discipline that emphasizes the use of economic analysis to understand the basic workings of financial markets, particularly the measurement and pricing of risk and the intertemporal allocation of funds |
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|
Term
|
Definition
| deciding where to generate funds from internal sources or from sources external to the firm at the lowest long-run cost possible |
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|
Term
|
Definition
| a system in which governments are committed to maintaining a target exchange such as under Brenton Woods |
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|
Term
|
Definition
| one whose value is set primarily by market forces |
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Term
|
Definition
| when previously exported products flow-back into a country |
|
|
Term
| foreign direct investment (FDI) |
|
Definition
| the acquisition abroad of physical assets such as plant and equipment with operating control residing in the parent corporation |
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|
Term
| foreign exchange market intervention |
|
Definition
| official purchases and sales of foreign exhange that nations undertake through their central banks to influence their currencies |
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|
Term
|
Definition
| The variability of a firm's or asset's value that is due to uncertain exchange rate changes |
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Term
|
Definition
| exists if the forward rate expressed in dollars is below the spot rate |
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|
Term
|
Definition
| the use of forward contracts to fix the home currency value of future foreign currency cash flows. Specifically, a company that is long a foreign currency will sell the foreign currency forward, where as a company that is short a foreign currency will buy the currency forward |
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Term
|
Definition
| exists if the forward rate is above the spot rate |
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|
Term
|
Definition
| price at which foreign exhange is quoted for delivery at a specified future date |
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Term
|
Definition
| aka clean float- An exchange rate system characterized by the absence of government intervention. |
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|
Term
| freely floating exchange rate |
|
Definition
| absence of government intervention |
|
|
Term
|
Definition
| as defined by FASB 52, an affiliate's functional currency is the currency of the primary economic environment in which the affiliate generates and spends cash |
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Term
|
Definition
| most common aproach to generating model-based forecasts of future exchange rates |
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|
Term
|
Definition
| a hedging technique designed to reduce a firms local currency accounting exposure by altering either the amounts or the currencies or both of the planned cash flows of the parent or its subsidiaries |
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Term
|
Definition
| the integration of national economies through free trade |
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|
Term
|
Definition
| managers of firms that operate in multiple companies that need specialized knowledge of the political environments in those countries, where their materials are coming from, what are their alternatives or substitutes, how they are moving their matierials and the changing relative values of those materials |
|
|
Term
|
Definition
| A system of setting currency values whereby the participating countries commit to fix the prices of their domestic currencies in terms of a specified amount of gold |
|
|
Term
| government budget deficit |
|
Definition
| a closely watched figure that equals government spending minus taxes |
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|
Term
|
Definition
| a currency expected to maintain it's value or appreciate |
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|
Term
|
Definition
| to enter into a forward contract in order to protect the home currency value of foreign currency denominated assets or liabilities |
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|
Term
|
Definition
| in accounting terminology, refers to the rate in effect at the time a foreign currency asset was acquired or a liablity was incurred |
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|
Term
| hyperinflationary country |
|
Definition
| defined by FASB 52 as one that has cumumlative inflation of approximately 100% or more over a three year period |
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Term
|
Definition
| equals the exchange rate change during a period |
|
|
Term
| interest rate differential |
|
Definition
| In equilibrium, with no government interference, it should aproximately equal the anticipated inflation differential between 2 currencies |
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Term
|
Definition
| the currency of a country with a lower interest rate should be at a forward premium in terms of the currency of the country with the higher rate |
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|
Term
| internataional monetary system |
|
Definition
| the set of policies, institutions, practices, regulations, and mechanisms that determine the rate at which one currency is exchanged for another |
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|
Term
| international Fisher effect |
|
Definition
| states that curencies with low interest rates are expected to appreciate relative to currencies with high interest rates |
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|
Term
| international diversification |
|
Definition
| the attempt to reduce risk by investing in more than one nation. By diversifying across nations whose economic cycles are not perfectly in phase, investors can typically reduce the variability of their returns |
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Term
|
Definition
| firms investing directly in the controlling power of international assets |
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|
Term
|
Definition
| the allocation of funds over time in such a way that share holder wealth is maximized |
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Term
|
Definition
| the flow of investment money between countries |
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Term
|
Definition
| exchange-adjusted prices of identical tradable goods and financial assets must be within transaction costs of equality worldwide |
|
|
Term
|
Definition
| Official institution that lends funds to countries or banks that get into financial trouble. It is designed to avert the threat of a financial panic. |
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Term
|
Definition
| assets' ability to be exchanged into goods or other assets |
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|
Term
| macroeconomic accounting identities |
|
Definition
| link domestic spending and production o saving, consumption, and investment behavior and hence to the financial account and current account balances |
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|
Term
|
Definition
| aka dirty float-this is a system of floating exchange rates with central bank intervention to reduce currency fluctuations |
|
|
Term
|
Definition
| a market in which the prices of traded securities readily incorporate new information |
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|
Term
|
Definition
| deciding which markets to sell in |
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|
Term
|
Definition
| forecasts of exchange rate changes derived from current forward rates |
|
|
Term
|
Definition
| relies on painstaking examination of the macroeconomic variables and policies that are likely to influence a currency's prospects. |
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|
Term
|
Definition
| currency in circulation plus bank reserves |
|
|
Term
|
Definition
| A group of states that join together to have a single central bank that issues a common currency |
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|
Term
| monetary/nonmonetary method |
|
Definition
| unde this translation method, monetary items (e.g. cash, accounts payable and receivable, and long-term debt) are translated at the current rate while non monetary items (e.g. inventory, fixed assets, and long-term investments) are translated at historical rates |
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|
Term
|
Definition
| when a central bank, that lacks independence, is forced to finance the public sector deficit by buying govenrment debt with newly created money |
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Term
|
Definition
| the use of simultaneous borrowing and lending transactions in two different currencies to lock in the home currency value of a foreign currency asset |
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|
Term
|
Definition
| tendency to incur risks that one is protected against |
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|
Term
|
Definition
| The tendency to incur risks that one is protected against |
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|
Term
| multinational corporation (MNC) |
|
Definition
| a company engaged in producing and selling goods or services in more than one country |
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|
Term
|
Definition
| the total amount of money that the nation spends on goods and services and can be divided into spending on consumption or real investment |
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|
Term
|
Definition
| aka national product and it is either spent on consumption or saved |
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Term
|
Definition
| spent on consumption or saved aka national income |
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|
Term
|
Definition
| the difference between investment abroad and foreign investment domestically |
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|
Term
|
Definition
| the change in pricate domestic borrowing or lending that is required to keep payments in balance without adjusting official reserves, Nonliquid, private, short-term capital flows and errors and omissions are included in the balance, liquid assets and liabilities are excluded |
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|
Term
|
Definition
| the currency range in which risk is not shared |
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|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
| price quoted on lending and borrowing transactions |
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|
Term
| official reserve transaction balance |
|
Definition
| the adjustment required in official reserves to achieve balance of payments equilibrium |
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|
Term
|
Definition
| sale or purchase of Treasury securities |
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|
Term
|
Definition
| degree to which an exchange rate change in combination with price changes will alter a company's future operating cash flows |
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|
Term
|
Definition
| the real cost of hedging: (the forward rate- future expected exchange rate) / spot rate |
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|
Term
|
Definition
| Largest area in which it makes sense to have only one currency. It is defined as that area for which the cost of having an additional currency---higher costs of doing business and greater currency risk ---just balances the benefits of anotehr currency--- reduced vulnerability to economic shocks associated with the option to change the area's exchange rate. |
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|
Term
|
Definition
| the practice of purchasing a significant percentage of intermediate components from outside suppliers |
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|
Term
|
Definition
| the agreed upon exchange rate in a fixed exchange rate system like Brenton Woods |
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|
Term
|
Definition
| set of equilibrium relationships that should apply to product prices, interest rates, and spot and forward exchange rates if markets are not impeded |
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|
Term
|
Definition
| one whose value is set by the government |
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|
Term
|
Definition
| possibility that during the time period studied investors anticipated significant events that did not materialize, thereby invalidating statistical inferences based on data drawn from that period |
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|
Term
|
Definition
| used to manage competitive risks that cannot be dealt with through marketing changes alone |
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|
Term
|
Definition
| purchases of financial assets with a maturity greater than one year |
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|
Term
|
Definition
| a hedge embedded in a transaction contract in which an establish base price is adjusted to reflect certain exchange rate changes |
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|
Term
| price elasticity of demand |
|
Definition
| the percentage change in the quantity demanded of a particular good or service for a given percentage change in price |
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|
Term
| price-specie-flow mechanism |
|
Definition
| Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of species (gold coins) that would act to equalize prices across countries and automatically bring international payments back in balance |
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|
Term
|
Definition
| how much can the exchange rate fluctuate and the firm still maintain its dollar margins both abroad and home |
|
|
Term
|
Definition
| the decision on the price at which to sell the product, the key issue here is whether to focus on market share or profit margin |
|
|
Term
|
Definition
| The act of returning state-owned or state-run companies back to the private sector, usually by selling them off |
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|
Term
|
Definition
| the time it takes to bring new and improved products to market. Japanese companies have excelled in compressing product cycles |
|
|
Term
|
Definition
| the development of new products, often used as a strategy of firms selling to the industrial market confronting a strong home currency |
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|
Term
|
Definition
| used to manage competitive risks that cannot be dealt with through marketing changes alone |
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|
Term
|
Definition
| deals with areas such as new product introduction, product line decisions, and product innovation |
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|
Term
|
Definition
| when a MNC has created a portfolio of plants world wide and can shift production between them in order to achieve the best economies of production |
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|
Term
|
Definition
| protecting domestic industry from import competition by means of tariffs quotas and other trade barriers |
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|
Term
|
Definition
| A unit of home currency should have the same purchasing power worldwide |
|
|
Term
|
Definition
| government regulation specifying the quantity of particular products that can be imported to a country |
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|
Term
|
Definition
|
|
Term
| real (inflation-adjusted) exchange rate |
|
Definition
| measured as the nominal (actual) exchange rate adjusted for changes in relative price levels |
|
|
Term
|
Definition
| nominal exchange rate adjusted for changes in the relative purchasing power of each currency since some base period |
|
|
Term
|
Definition
| the spot rate adjusted for relative price level changes since a base period |
|
|
Term
|
Definition
| nominal or actual interest rate minus the rate of inflation |
|
|
Term
|
Definition
| exchange rate between current and future goods |
|
|
Term
|
Definition
| refers to plant and equipment, research and development, and other expenditures designed to increase the nations productive capacity |
|
|
Term
|
Definition
| denomination currency in the exchange rate |
|
|
Term
|
Definition
| the currency in which the parent firm perpares its own financial statements, that is US dollars for a US company |
|
|
Term
|
Definition
|
|
Term
| reverse foreign investment |
|
Definition
| investment in the home country (began in the U.S. when western european firms acquired US firms and more recently the Japanese firms have been investing in the US and Western European firms, largely in response to preceived or actual restrictions on Japanese exports to these markets.) |
|
|
Term
|
Definition
| the process that leads to equality of the risk-adjusted returns on different securities, unless market imperfections that hinder this adjustment process exist |
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|
Term
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Definition
| the movement of currency risk from one firm to another by changing the currency of denomination of the contract |
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Definition
| The profit to the central bank from money creation; it equals the difference between the cost of issuing the money and the value of the goods and services that money can buy |
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Definition
| Central bank's profit on the currency it prints |
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Definition
| a currency expected to depreciate |
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Definition
| state controlled investment funds |
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Definition
| price at which currencies are traded for immediate delivery (actual settlement takes place 2 days later) |
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Definition
| a number on the balance-of-payments account that reflects errors and omissions in the collecting data on international transactions |
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Definition
| neutralization of impact of foreign exchange market intervention on the domestic money supply, through an open-market operation |
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Term
| systematic (nondiversifiable) risk |
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Definition
| marketwide influences that affect all assets to some extent, such as the state of the economy |
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Definition
| a tax imposed on imported products. It can be used to raise revenue, to discourage purchase of foreign products, or some combination |
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Definition
| the shifting of gains or losses from one tax jurisdiction to another to profit from diffrences in tax rates |
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Definition
| it focuses exclusively on past price and volume movements, while ignoring economic and political factores, to forecast currency winners and losers |
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Term
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Definition
| under this currency translation method the choice of exchange rate depends on the underlying method of valuation. Assets and liabilities valued at historical cost (market) are translated at the historical rate (current rate) |
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Definition
| the weighted average of a nation's export prices relative to its import prices |
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Definition
| systematic and unsystematic risk |
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Definition
| when a country buys more goods and services from another country than it sells to that country |
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Term
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Definition
| the extent to which a given exchange rate change will change the value of foreign-currency-denominated transactions already entered into |
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Term
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Definition
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Term
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Definition
| method of technical analysis that seek to identify price trends via various mathematical computations |
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Definition
| the forward rate should reflect the expected future spot rate on the date of settlement of the forward contract |
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Term
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Definition
| a market condition that will dictate another condition through arbitrage (e.g. the international fisher effect statst the athe interest rate differential between two countries is an unbiased perdictor of the future change in the spot rate of exchange) |
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Term
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Definition
| gifts and grants overseas |
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Term
| unsterilized intervention |
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Definition
| monetary authorities have not insulated their domestic money supplies from the foreign exchange transactions |
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Term
| unsystematic (diversafiable) risk |
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Definition
| risks that specific to a given firm such as a strike |
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