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A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market.The currency that is used as the reference is called the counter currency, quote currency, or currency [1] and the currency that is quoted in relation is called the base currency or transaction currency.
The first currency (XXX) is the base currency that is quoted relative to the second currency (YYY), called the counter currency (or quote currency). For instance, the quotation EURUSD (EUR/USD) 1.5465 is the price of the Euro expressed in US dollars, meaning 1 euro = 1.5465 dollars. The market convention is to quote most exchange rates against ...
Spot price – the price of the asset at the time of the trade. Forward price – the price of the asset for delivery at a future time. Notional – the amount of each currency that the option allows the investor to sell or buy. Ratio of notionals – the strike, not the current spot or forward. Numéraire – the currency in which an asset is ...
An investor enters into a forward agreement to purchase a notional amount, N, of the base currency at the contracted forward rate, F, and would pay NF units of the quoted currency. On the fixing date, that investor would theoretically be able to sell the notional amount, N , of the base currency at the prevailing spot rate, S , earning NS units ...
A foreign exchange spot transaction, also known as FX spot, is an agreement between two parties to buy one currency against selling another currency at an agreed price for settlement on the spot date. The exchange rate at which the transaction is done is called the spot exchange rate.
With sterilization, any purchase of foreign exchange is accompanied by an equal-valued sale of domestic bonds. For example, desiring to decrease the exchange rate, expressed as the price of domestic currency, without changing the monetary base, the monetary authority purchases foreign-currency bonds, the same action as in the last section.
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The terms of trade for the other country must be the reciprocal (100/50 = 2). When this number is falling, the country is said to have "deteriorating terms of trade". If multiplied by 100, these calculations can be expressed as a percentage (50% and 200% respectively). If a country's terms of trade fall from say 100% to 70% (from 1.0 to 0.7 ...