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30 Cards in this Set
- Front
- Back
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Currency Exchange Markets
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Electronic markets where banks and institutional traders buy and sell various currencies on behalf of businesses and other clients.
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Currency Exchange Rate
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Value of one currency relative to another currency.
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Direct Quotation Method
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Indicates the amount of a home country's currency necessary to purchase one unit of a foreign currency.
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Indirect Quotation Method
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Indicates the amount of a foreign currency necessary to purchase one unit of the home country's currency.
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Spot Exchange Rate
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Rate being quoted for current delivery of the currency.
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Forward Exchange Rate
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Rate for the purchase or sale of a currency where delivery will take place at future date.
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Purchasing Power Parity (PPP)
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Currency of a country with relatively higher inflation rate will depreciate relative to the currency of a country with a relatively lower inflation rate.
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Interest Rate Parity (IRP)
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Currency of a country with a relatively higher interest rate will depreciate relative to the currency a country with a relatively lower interest rate.
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Political Risk
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Actions by a sovereign nation to interrupt or change the value of cash flows accruing to foreign investors.
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Economic Risk
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Risk associated with possible slow or negative economic growth, as well as with the likelihood of variability.
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Arbitrage
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Buying commodities, securities, or bills of exchange in one market and immediately selling them in another to make a profit from price differences in the two markets.
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Draft (bill of exchange)
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An unconditional order for the payment of money from one person to another.
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Sight Draft
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Draft requiring immediate payment.
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Time Draft
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Draft that is payable at a specified future date.
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Documentary Draft
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Draft that is accompanied by an order bill of lading and other documents.
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Order Bill of Lading
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Document given by a transportation company that lists goods to be transported and terms of the shipping agreement.
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Clean Draft
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A draft that is not accompanied by any special documents.
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Commercial Letter of Credit
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Statement by a bank guaranteeing acceptance and payment of a draft up to a stated amount.
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Trust Receipt
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An instrument through which a bank retains title to goods until they are paid for.
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Banker's Acceptance
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A promise of future payment issued by a firm and guaranteed by a bank.
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Export-Import Bank
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Bank established to aid in financing and facilitating trade between the U.S. and other countries.
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Traveler's Letter of Credit
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Issued by a bank to banks in other countries authorizing them to cash checks or purchase drafts presented by the bearer.
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Flexible Exchange Rates
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A system in which international exchange rates are determined by supply and demand.
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Balance of Payments
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A summary of all economic transactions between one country and the rest of the world.
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Balance of Trade
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The net value of a country's exports of goods and services compared to its imports.
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Merchandise Trade Balance
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The net difference between a country's import and export of goods.
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Current Account Balance
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The flow of income into and out of the United States during a specified time period.
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Capital Account Balance
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Foreign government and private investment in the United States netted against similar U.S. investment in foreign countries.
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Dirty Float
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Intervention by central banks to control exchange rates in the foreign exchange market's flexible exchange system.
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Special Drawing Rights (SDRs)
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International reserve assets created by the International Monetary Fund that can be drawn upon by member nations.
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