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In foreign exchange trading (FX), a rollover is the action taking place at end of day, where all open positions with value date equals SPOT, will be rolled over to the next business day. [1] This happens since in FX trading the trader doesn't want to actually buy the traded currencies but to continue to trade until position is closed. [2]
In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument that gives the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. [1] See Foreign exchange derivative. [2]
Retail foreign exchange trading is a small segment of the larger foreign exchange market where individuals speculate on the exchange rate between different currencies. This segment has developed with the advent of dedicated electronic trading platforms and the internet, which allows individuals to access the global currency markets.
In finance, a foreign exchange swap, forex swap, or FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates (normally spot to forward) [1] and may use foreign exchange derivatives. An FX swap allows sums of a certain currency to be used to fund charges designated in another ...
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The following equation represents covered interest rate parity, a condition under which investors eliminate exposure to foreign exchange risk (unanticipated changes in exchange rates) with the use of a forward contract – the exchange rate risk is effectively covered. Under this condition, a domestic investor would earn equal returns from ...
A currency future, also known as an FX future or a foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date; see Foreign exchange derivative. [1] [2] Typically, one of the currencies is the US dollar.
For a long position this payoff is: = For a short position, it is: f T = K − S T {\displaystyle f_{T}=K-S_{T}} Since the final value (at maturity) of a forward position depends on the spot price which will then be prevailing, this contract can be viewed, from a purely financial point of view, as "a bet on the future spot price" [ 3 ]