Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

25 Cards in this Set

  • Front
  • Back
foreign exchange market
a market for converting the currency of one country into that of another country
exchange rate
the rate at which one currency is converted into another
foreign exchange risk
the risk that changes in exchange rates will hurt the profitability of a business deal
currency speculation
involves short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates
spot exchange rate
the exchange rate at which a foreign exchange dealer will convert one currency into another that particular day
hedge fund
investment fund that not only buys financial assets (stocks, bonds, currencies) but also sells them short
short selling
occurs when an investor places a speculative bet that the value of a financial asset will decline, and profits from that decline
forward exchange
when two parties agree to exchange currency and execute a deal at some specific date in the future
forward exchange rate
the exchange rates governing forward exchange transactions
currency swap
simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
the purchase of securities in one market for immediate resale in another to profit from a price discrepancy
law of one price
in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in the same currency
efficient market
a market where prices reflect all available information
relatively efficient market
one in which few impediments to international trade and investment exist
Fisher effect
nominal interest rates in each country equal the required real rate of interest and the expected rate of inflation over the time period for which the funds are to be lent
International Fisher Effect
for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between countries
efficient market
a market where prices reflect all available information
inefficient market
one in which prices do not reflect all available info
fundamental analysis
draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements
technical analysis
uses price and volume data to determine past trends, which are expected to continue
freely convertible currency
a country's currency is freely convertible when the government of that country allows both residents and nonresidents to purchase unlimited amounts of foreign currency with the domestic currency
externally convertible currency
nonresidents can convert their holdings of domestic currency into foreign currency, but the ability of residents to convert the currency is limited in some way
nonconvertible currency
a currency is not convertible when both residents and nonresidents are prohibited from converting their holdings of that currency into another currency
capital flight
residents convert domestic currency into a foreign currency
a trade of goods and services for other goods and services