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Definition of Foreign currency
An option that conveys the right to buy or sell a specified amount of foreign
The process of restating foreign currency accounts of subsidiaries into the
The change in the value of a firm's foreign currency denominated accounts due to a
A financial future contract for the delivery of a specified foreign currency.
An option to buy or sell a foreign currency.
Under this currency translation method, all foreign currency balance-sheet and income
For foreign exchange, the number of U.S. dollars needed to buy one unit of a foreign currency.
A bank that regularly accepts foreign currency denominated deposits and makes foreign currency loans.
The price of one currency in terms of another, in this book defined as number of units of foreign currency per dollar.
A fund containing the central bank's holdings of foreign currency or claims thereon.
The risk that a long or short position in a foreign currency might have to be closed out
Purchase or sale of forward foreign currency in order to offset a known future cash flow.
A widely used model for pricing foreign currency options.
Reducing one's exposure to risk by buying and selling contracts for future delivery (of foreign currency, for example) at a price that is determined now.
For foreign exchange, the number of units of a foreign currency needed to buy one U.S.$.
International Monetary Fund
An organization founded in 1944 to oversee exchange arrangements of
Money market hedge
The use of borrowing and lending transactions in foreign currencies to lock in the
Possibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of
A foreign currency held by a central bank or monetary authority for the purposes of
Anyone who buys or sells an asset, such as a foreign currency, in the hope of profiting from a change in its price.
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.
Risk to a firm with known future cash flows in a foreign currency that arises from
Asian currency units (ACUs)
Dollar deposits held in Singapore or other Asian centers.
A currency that is not freely convertible to other currencies due to exchange controls.
Controlled foreign corporation (CFC)
A foreign corporation whose voting stock is more than 50% owned
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
Related: Exchange rate risk
Currency risk sharing
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
Devaluation A decrease in the spot price of the 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
European Currency Unit (ECU)
An index of foreign exchange consisting of about 10 European currencies,
Foreign banking market
That portion of domestic bank loans supplied to foreigners for use abroad.
A bond issued on the domestic capital market of anther company.
Foreign bond market
That portion of the domestic bond market that represents issues floated by foreign
Foreign Corrupt Practices Act (FCPA)
a law passed by U.S. Congress in 1977 that makes it illegal for a U.S. company to engage in various “questionable” foreign payments and
Foreign direct investment (FDI)
The acquisition abroad of physical assets such as plant and equipment, with
Foreign equity market
That portion of the domestic equity market that represents issues floated by foreign companies.
currency from another country.
The currency of a foreign country.
Foreign exchange controls
Various forms of controls imposed by a government on the purchase/sale of
Foreign exchange dealer
A firm or individual that buys foreign exchange from one party and then sells it to
Foreign Exchange Market
A worldwide market in which one country's currency is bought or sold in exchange for another country's currency.
Foreign exchange swap
An agreement to exchange stipulated amounts of one currency for another currency
Part of a nation's internal market, representing the mechanisms for issuing and trading
Foreign market beta
A measure of foreign market risk that is derived from the capital asset pricing model.
Foreign Sales Corporation (FSC)
A special type of corporation created by the Tax Reform Act of 1984 that
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
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 currency, frequently the U.S. dollar, that is used by other countries to denominate the assets they hold as international reserves.
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
Accumulated Other Comprehensive Income
Cumulative gains or losses reported in shareholders'
American Depositary Receipts (ADRs)
Certificates issued by a U.S. depositary bank, representing foreign
Balance of Payments
The difference between the demand for and supply of a country's currency on the foreign exchange market.
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
That part of the balance of payments accounts that records demands for and supplies of a currency arising from activities that affect current income, namely imports, exports, investment income payments such as interest and dividends, and transfers such as gifts, pensions, and foreign aid.
Current time to maturity on an outstanding debt instrument.
Governmental restrictions on the purchase of foreign currencies by domestic citizens or
FASB No. 52
The U.S. accounting standard which was replaced by FASB No. 8. U.S. companies are required
FASB No. 8
U.S. accounting standard that requires U.S. firms to translate their foreign affiliates' accounts by
Floating exchange rate
A country's decision to allow its currency value to freely change. The currency is not
Theory that says a country's trade deficit will initially worsen after its currency depreciates because
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
An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.
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