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Definition of Currency
Dollar deposits held in Singapore or other Asian centers.
A currency that is not freely convertible to other currencies due to exchange controls.
Taking advantage of divergences in exchange rates in different money markets by
The value of a portfolio of specific amounts of individual currencies, used as the basis for
A financial future contract for the delivery of a specified foreign currency.
An option to buy or sell a foreign currency.
Related: Exchange rate risk
An agreement by the parties to a transaction to share the currency risk associated with
Asset allocation in which the investor chooses among investments denominated in
An agreement to swap a series of specified payment obligations denominated in one currency
Eurobonds that pay coupon interest in one currency but pay the principal in a different
A short-term fixed rate time deposit denominated in a currency other than the local
The money market for borrowing and lending currencies that are held in the form of
An index of foreign exchange consisting of about 10 European currencies,
Foreign currency option
An option that conveys the right to buy or sell a specified amount of foreign
Foreign currency translation
The process of restating foreign currency accounts of subsidiaries into the
A freely convertible currency that is not expected to depreciate in value in the foreseeable future.
Such a clause on a Euro loan permits the borrower to switch from one currency to
Give the borrower the possibility of drawing a loan in different currencies.
The currency in which the parent firm prepares its own financial statements; that is, U.S.
A foreign currency held by a central bank or monetary authority for the purposes of
A currency that is expected to drop in value relative to other currencies.
Virtual currency option
A new option contract introduced by the PHLX in 1994 that is settled in US$ rather
A currency, frequently the U.S. dollar, that is used by other countries to denominate the assets they hold as international reserves.
The change in the value of a firm's foreign currency denominated accounts due to a
American Depositary Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreign
A loan in which two companies in separate countries borrow each other's currency for a
Packages that involve the exchange of more than two currencies against a base currency at
A devaluation that is designed to cheapen a nation's currency and thereby
A fixed rate currency swap against floating U.S. dollar LIBOR payments.
The degree of freedom to exchange a currency without government restrictions or controls.
Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign
The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
Current time to maturity on an outstanding debt instrument.
Current rate method
Under this currency translation method, all foreign currency balance-sheet and income
A set of transactions (also called a debt-equity swap) in which a firm buys a country's dollar bank
Swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are
For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency.
A system of floating exchange rates in which the government occasionally intervenes to change
A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans.
European Union (EU)
An economic association of European countries founded by the Treaty of Rome in
Short- to medium-term debt instrument sold in the Eurocurrency market.
Governmental restrictions on the purchase of foreign currencies by domestic citizens or
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
Exchange rate risk
Also called currency risk, the risk of an investment's value changing because of currency
The variability of a firm's value that results from unexpected exchange rate changes or the
Offsetting exposures in one currency with exposures in the same or another currency,
FASB No. 8
U.S. accounting standard that requires U.S. firms to translate their foreign affiliates' accounts by
FASB No. 52
The U.S. accounting standard which was replaced by FASB No. 8. U.S. companies are required
A country's decision to tie the value of its currency to another country's currency, gold
Floating exchange rate
A country's decision to allow its currency value to freely change. The currency is not
currency from another country.
Foreign exchange controls
Various forms of controls imposed by a government on the purchase/sale of
Foreign exchange risk
The risk that a long or short position in a foreign currency might have to be closed out
Foreign exchange swap
An agreement to exchange stipulated amounts of one currency for another currency
Purchase or sale of forward foreign currency in order to offset a known future cash flow.
A currency trades at a forward discount when its forward price is lower than its spot price.
Forward exchange rate
Exchange rate fixed today for exchanging currency at some future date.
A currency trades at a forward premium when its forward price is higher than its spot price.
Fully modified pass-throughs
Agency pass-throughs that guarantee the timely payment of both interest and
Garmen-Kohlhagen option pricing model
A widely used model for pricing foreign currency options.
Group of five (G5/G-5)
The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that
For foreign exchange, the number of units of a foreign currency needed to buy one U.S.$.
International Banking Facility (IBF)
International Banking Facility. A branch that an American bank
International Monetary Fund
An organization founded in 1944 to oversee exchange arrangements of
Theory that says a country's trade deficit will initially worsen after its currency depreciates because
Also known as "dirty" float, this is a system of floating exchange rates with central bank
Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.
Money market hedge
The use of borrowing and lending transactions in foreign currencies to lock in the
M1-A: currency plus demand deposits
Note issuance facility (NIF)
An agreement by which a syndicate of banks indicates a willingness to accept
In the balance of payments, other capital is a residual category that groups all the capital
Actual forward rate expressed in dollars per currency unit, or vice versa.
A process whereby two companies in different countries borrow each other's currency for a
Philadelphia Stock Exchange (PHLX)
A securities exchange where American and European foreign
PIBOR (Paris Interbank Offer Rate)
The deposit rate on interbank transactions in the Eurocurrency market
Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of
currency options with a guaranteed exchange rate that enable buyers who like the asset, German
A central financial subsidiary used by an MNC to reduce transaction exposure by having
An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.
Spot exchange rates
Exchange rate on currency for immediate delivery. Related: forward exchange rate.
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.
Statement of Financial Accounting Standards No. 8
This is a currency translation standard previously in
Statement of Financial Accounting Standards No. 52
This is the currency translation standard currently
Under this currency translation method, the choice of exchange rate depends on the
Total dollar return
The dollar return on a nondollar investment, which includes the sum of any
Risk to a firm with known future cash flows in a foreign currency that arises from
Slang for one billion dollars. Used particularly in currency trading, e.g. for Japanese yen since on
Amounts held in currency and coin (commonly referred to as petty cash) and amounts on deposit in financial institutions.
The amount of currency and coin that a company keeps on hand to pay for small purchases and expenses.
An exchange of cash flows between two counterparties. The
The purchase of securities on one market for immediate resale on
Amount of one currency needed to purchase one unit of another.
law of one price
Theory that prices of goods in all countries should be equal when translated to a common currency.
Increase in the value of a currency.
Balance of Payments
The difference between the demand for and supply of a country's currency on the foreign exchange market.
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