Definition of Bretton Woods

Bretton Woods

Site of a 1944 international monetary conference at which the postwar fixed exchange rate system was structured and the International Monetary Fund (IMF) and World Bank were created.

Bretton Woods Agreement

An agreement signed by the original United Nations members in 1944 that
established the International Monetary Fund (IMF) and the post-World War II international monetary system
of fixed exchange rates.

Gold exchange standard

A system of fixing exchange rates adopted in the bretton woods agreement. It
involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar.

Smithsonian agreement

A revision to the bretton woods international monetary system which was signed at
the Smithsonian Institution in Washington, D.C., U.S.A., in December 1971. Included were a new set of par
values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.

World Bank

A multilateral development finance agency created by the 1944 bretton woods, New
Hampshire negotiations. It makes loans to developing countries for social overhead capital projects, which are
guaranteed by the recipient country. See: International Bank for Reconstruction and Development.

American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.

Bill of exchange

General term for a document demanding payment.

Bond agreement

A contract for privately placed debt.

Cash deficiency agreement

An agreement to invest cash in a project to the extent required to cover any cash
deficiency the project may experience.

Chicago Mercantile Exchange (CME)

A not-for-profit corporation owned by its members. Its primary
functions are to provide a location for trading futures and options, collect and disseminate market information,
maintain a clearing mechanism and enforce trading rules.

Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s Performance Presentation standards Implementation
Committee is charged with the responsibility to interpret, revise and update the AIMR Performance
Presentation standards (AIMR-PPS(TM)) for portfolio performance presentations.

Commodities Exchange Center (CEC)

The location of five New York futures exchanges: Commodity
exchange, Inc. (COMEX), the New York Mercantile exchange (NYMEX), the New York Cotton exchange,
the Coffee, Sugar and Cocoa exchange (CSC), and the New York futures exchange (NYFE). common size
statement A statement in which all items are expressed as a percentage of a base figure, useful for purposes of
analyzing trends and the changing relationship between financial statement items. For example, all items in
each year's income statement could be presented as a percentage of net sales.

Concession agreement

An understanding between a company and the host government that specifies the
rules under which the company can operate locally.

Convertible exchangeable preferred stock

Convertible preferred stock that may be exchanged, at the
issuer's option, into convertible bonds that have the same conversion features as the convertible preferred
stock.

Double-tax agreement

agreement between two countries that taxes paid abroad can be offset against
domestic taxes levied on foreign dividends.

Equity contribution agreement

An agreement to contribute equity to a project under certain specified
conditions.

Exchange

The marketplace in which shares, options and futures on stocks, bonds, commodities and indices
are traded. Principal US stock exchanges are: New York Stock exchange (NYSE), American Stock exchange
(AMEX) and the National Association of Securities Dealers (NASDAQ)

The Exchange

A nickname for the New York stock exchange. Also known as the Big Board. More than
2,000 common and preferred stocks are traded. The exchange is the oldest in the United States, founded in
1792, and the largest. It is located on Wall Street in New York City.

Exchange controls

Governmental restrictions on the purchase of foreign currencies by domestic citizens or
on the purchase of the local domestic currency by foreigners.

Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.

Exchange of stock

Acquisition of another company by purchase of its stock in exchange for cash or shares.

Exchange offer

An offer by the firm to give one security, such as a bond or preferred stock, in exchange for
another security, such as shares of common stock.

Exchange rate

The price of one country's currency expressed in another country's currency.

Exchange Rate Mechanism (ERM)

The methodology by which members of the EMS maintain their
currency exchange rates within an agreed upon range with respect to other member countries.

Exchange rate risk

Also called currency risk, the risk of an investment's value changing because of currency
exchange rates.

Exchange risk

The variability of a firm's value that results from unexpected exchange rate changes or the
extent to which the present value of a firm is expected to change as a result of a given currency's appreciation
or depreciation.

Exchangeable Security

Security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.

Fiscal agency agreement

An alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an
agent of the borrower.

Fixed-exchange rate

A country's decision to tie the value of its currency to another country's currency, gold
(or another commodity), or a basket of currencies.

Floating exchange rate

A country's decision to allow its currency value to freely change. The currency is not
constrained by central bank intervention and does not have to maintain its relationship with another currency
in a narrow band. The currency value is determined by trading in the foreign exchange market.

Foreign exchange

Currency from another country.

Foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of
foreign currencies by residents or on the purchase/sale of local currency by nonresidents.

Foreign exchange dealer

A firm or individual that buys foreign exchange from one party and then sells it to
another party. The dealer makes the difference between the buying and selling prices, or spread.

Foreign exchange risk

The risk that a long or short position in a foreign currency might have to be closed out
at a loss due to an adverse movement in the currency rates.

Foreign exchange swap

An agreement to exchange stipulated amounts of one currency for another currency
at one or more future dates.

Forward exchange rate

exchange rate fixed today for exchanging currency at some future date.

Forward rate agreement (FRA)

agreement to borrow or lend at a specified future date at an interest rate
that is fixed today.

Gold standard

An international monetary system in which currencies are defined in terms of their gold
content and payment imbalances between countries are settled in gold. It was in effect from about 1870-1914.

Golden parachute

Compensation paid to top-level management by a target firm if a takeover occurs.

Historical exchange rate

An accounting term that refers to the exchange rate in effect when an asset or
liability was acquired.

Interest rate agreement

An agreement whereby one party, for an upfront premium, agrees to compensate the
other at specific time periods if a designated interest rate (the reference rate) is different from a predetermined
level (the strike rate).

London International Financial Futures Exchange (LIFFE)

A London exchange where Eurodollar futures
as well as futures-style options are traded.

London International Financial Futures Exchange (LIFFE)

London exchange where Eurodollar futures as well as futures-style options are traded.

Monetary gold

gold held by governmental authorities as a financial asset.

New York Stock Exchange (NYSE)

Also known as the Big Board or The Exhange. More than 2,00 common
and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the
largest. It is lcoated on Wall Street in New York City

Nominal exchange rate

The actual foreign exchange quotation in contrast to the real exchange rate that has
been adjusted for changes in purchasing power.

Note agreement

A contract for privately placed debt.

Organized exchange

A securities marketplace wherein purchasers and sellers regularly gather to trade
securities according to the formal rules adopted by the exchange.

Philadelphia Stock Exchange (PHLX)

A securities exchange where American and European foreign
currency options on spot exchange rates are traded.

Preferred stock agreement

A contract for preferred stock.

Purchase agreement

As used in connection with project financing, an agreement to purchase a specific
amount of project output per period.

Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.

Real exchange rates

exchange rates that have been adjusted for the inflation differential between two countries.

Repurchase agreement

An agreement with a commitment by the seller (dealer) to buy a security back from
the purchaser (customer) at a specified price at a designated future date. Also called a repo, it represents a
collateralized short-term loan, where the collateral may be a Treasury security, money market instrument,
federal agency security, or mortgage-backed security. From the purchaser (customer) perspective, the deal is
reported as a reverse Repo.

Revolving credit agreement

A legal commitment wherein a bank promises to lend a customer up to a
specified maximum amount during a specified period.

Securities & Exchange Commission

The SEC is a federal agency that regulates the U.S.financial markets.

SIMEX (Singapore International Monetary Exchange)

A leading futures and options exchange in Singapore.

Smithsonian agreement

A revision to the Bretton Woods international monetary system which was signed at
the Smithsonian Institution in Washington, D.C., U.S.A., in December 1971. Included were a new set of par
values, widened bands to +/- 2.25% of par, and an increase in the official value of gold to US$38.00 per ounce.

Spot exchange rates

exchange rate on currency for immediate delivery. Related: forward exchange rate.

Standard deviation

The square root of the variance. A measure of dispersion of a set of data from their mean.

Standard error

In statistics, a measure of the possible error in an estimate.

Standardized normal distribution

A normal distribution with a mean of 0 and a standard deviation of 1.

Standardized value

Also called the normal deviate, the distance of one data point from the mean, divided by
the standard deviation of the distribution.

Standby agreement

In a rights issue, agreement that the underwriter will purchase any stock not purchased by investors.

Standstill agreements

Contracts where the bidding firm in a takeover attempt agrees to limit its holdings
another firm.

Statement of Financial Accounting Standards No. 8

This is a currency translation standard previously in
use by U.S. accounting firms. See: Statement of Accounting standards No. 52.

Statement of Financial Accounting Standards No. 52

This is the currency translation standard currently
used by U.S. firms. It mandates the use of the current rate method. See: Statement of Financial Accounting
standards No. 8.

Stock exchanges

Formal organizations, approved and regulated by the Securities and exchange Commission
(SEC), that are made up of members that use the facilities to exchange certain common stocks. The two major
national stock exchanges are the New York Stock exchange (NYSE) and the American Stock exchange (ASE
or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati.
The Arizona stock exchange is an after hours electronic marketplace where anonymous participants trade
stocks via personal computers.

Tax clawback agreement

An agreement to contribute as equity to a project the value of all previously
realized project-related tax benefits not already clawed back to the extent required to cover any cash
deficiency of the project.

Throughput agreement

An agreement to put a specified amount of product per period through a particular
facility. For example, an agreement to ship a specified amount of crude oil per period through a particular
pipeline.

Tolling agreement

An agreement to put a specified amount of raw material per period through a particular
processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a
particular aluminum plant.

Standard costs

A budget cost for materials and labour used for decision-making, usually expressed as a per unit cost that is applied to standard quantities from a bill of materials and to standard times from a
routing.

Securities and Exchange Commission (SEC)

The federal agency that
oversees the issuance of and trading in securities of public businesses.
The SEC has broad powers and can suspend the trading in securities of a
business. The SEC also has primary jurisdiction in making accounting
and financial reporting rules, but over the years it has largely deferred to
the private sector for the development of generally accepted accounting
principles (GAAP).

Standard Deviation

A statistical term that measures the dispersion of a variable
around its expected value. The standard deviation is often used as
a measure of risk when applied to a return on an investment.

Cost Accounting Standards Board (CASB)

a body established by Congress in 1970 to promulgate cost accounting
standards for defense contractors and federal agencies; disbanded
in 1980 and reestablished in 1988; it previously issued
pronouncements still carry the weight of law for those
organizations within its jurisdiction

ethical standard

a standard representing beliefs about moral
and immoral behaviors

expected standard

standard set at a level that reflects what
is actually expected to occur in the future period; it anticipates
future waste and inefficiencies and allows for them;
is of limited value for control and performance evaluation purposes

General Agreement

on Tariffs and Trade (GATT) a treaty
among many nations setting standards for tariffs and trade
for signees

golden parachute

a benefits package that is triggered by the
termination of a manager’s employment

ideal standard

a standard that provides for no inefficiencies
of any type; impossible to attain on a continuous basis

North American Free Trade Agreement (NAFTA)

an agreement among Canada, Mexico, and the United States establishing the North American Free Trade Zone, with a resulting reduction in trade barriers

perfection standard

see ideal standard

practical standard

a standard that can be reached or slightly
exceeded with reasonable effort by workers; it allows for
normal, unavoidable time problems or delays and for
worker breaks; it is often believed to be most effective in
inducing the best performance from workers, since such
a standard represents an attainable challenge

standard

a model or budget against which actual results are
compared and evaluated; a benchmark or norm used for
planning and control purposes

standard cost

a budgeted or estimated cost to manufacture
a single unit of product or perform a single service

standard cost card

a document that summarizes the direct
material, direct labor, and overhead standard quantities and
prices needed to complete one unit of product

standard cost system

a valuation method that uses predetermined
norms for direct material, direct labor, and overhead
to assign costs to the various inventory accounts and
Cost of Goods Sold

standard deviation

the measure of variability of data around
the average (or mean) value of the data

standard error of the estimate

a measure of dispersion that reflects the average difference between actual observations and expected results provided by a regression line

standard overhead application rate

a predetermined overhead rate used in a standard cost system; it can be a separate variable or fixed rate or a combined overhead rate

standard quantity allowed

the quantity of input (in hours or some other cost driver measurement) required at standard for the output actually achieved for the period

Standard deviation

A measure of the variation in a distribution, equal to the
square root of the arithmetic mean of the squares of the deviations from the
arithmetic mean; the square root of the variance.

Standard cost

A predetermined cost that is based on original engineering designs and
production methodologies. It is frequently used to determine the degree of additional
actual costs incurred above the standard rates.

exchange rate

Amount of one currency needed to purchase one unit of another.

expectations theory of exchange rates

Theory that expected spot exchange rate equals the forward rate.

forward rate of exchange

exchange rate for a forward transaction.

Securities and Exchange Commission (SEC)

Federal agency responsible for regulation of securities markets in the United
States.

spot rate of exchange

exchange rate for an immediate transaction.

Standard & Poor’s Composite Index

Index of the investment performance of a portfolio of 500 large stocks. Also called the
S&P 500.

standard deviation

Square root of variance. Another measure of volatility.

Effective Exchange Rate

The weighted average of several exchange rates, where the weights are determined by the extent of our trade done with each country.

Equation of Exchange

The quantity theory equation Mv = PQ.

Exchange Rate, Nominal

The price of one currency in terms of another, in this book defined as number of units of foreign currency per dollar.

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