FOREX CLASSROOM

BASIS:Basis is the difference between cash and futures prices, or the difference between(but similar) financial Instruments.

CALL:The optional right of an issuer to redeem bonds before their stated maturity, at a given price on a given data.

COVER:It is to protect the value of the future proceeds of an international trade transaction, usually by buying or selling the proceeds in the forward market.

FISCAL POLICY:It means the policy relating to taxation, expenditure, government’s debts and its profits management.

FOREIGN BOND:A bond issue for a foreign borrower, offered in the domestic capital market of a particular country and denominated in the currency of that country.

FUTURES AND OPTIONS:Futures  and  Options  are  financial  derivatives  (derived  as  they are  from  certain  basic  elements,  namely, exchange  rates,  interest  rates,  equities  and  commodities)  whose  value  reflects  the  changing  price  of  the  underlying  assets,  say,  currencies,  shares  etc.

GOLD  RUSH:Strong  demand  for  gold  in  the  free markets  by  private  buyers  for  purposes  of  speculation  or  hoarding  or  by  Central  Banks  for  Strengthening  their  reserves.

HOT  MONEY:Hot  money  or  flight  capital,  is  vast  sum  of  international  money,  transferred  by  the  owner  into  another  country  for  investment   for  speculative  purposes.

LAG:Lag  is  to  defer  payment  of  a  debt.   If  a  currency  is  under  pressure,  foreigners  making  payments  in  that  currency will  defer  payment  as  long  as  possible.

LEAD:Lead  is  to  prepay  a  debit.   If  a currency  is  expected  to  appreciate  in  value,  foreigners  making  payments  in  that  currency  will  accelerate  payment  of  obligations  in  that  currency.

LIMITS:Maximum  amounts  for  which  names  of  banks  are  taken  by  other  banks  in  the  foreign  exchange  market  (a)  for  forward  exchange  transactions, (b)  for  Euro-currency  transactions,  and  (c)  for  payments  arising  from  foreign  exchange  transactions  on  the  same  day.

LIQUID  FUNDS:Balances  on currency  account  sight  deposits  short  time  deposits,  long  time  deposits  with  escape  clauses,  money  at  call  or  at  short  notice,  bills  which  have  a  good  market.

OUTRIGHT:Forward  exchanges  bought  and  sold  unconnected  with  a  simultaneous  sale  or  purchases  of  spot  exchanges.

POSITION:The  net  commitment  in  a  currency.   It  is  Square  if  sales  equal  purchases.   Long  if  purchases  exceed  sales,  and  Short  if  sales  exceed  purchases.

 ULTIMO: Continental  practice  of  timing  transactions  to  matures  on  the  last  business  day  of  the  calendar  month.

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