INTB 200 Lecture Notes - Lecture 7: Foreign Exchange Risk, Foreign Exchange Market, The Foreign Exchange

• School: Drexel University
• Department: International Business
• Course: INTB 200
• Professor: Olsen Eydis

Document Summary

The foreign exchange market is a market for converting the currency of one country into that of another country. An exchange rate is the rate at which one currency is converted into another. Spot exchange rate: the rate at which a foreign exchange dealer converts one currency into another currency on a particular day. Determined by the interaction between supply and demand. Forward exchange rates - the exchange rate governing a forward exchange. A forward exchange occurs when two parties agree to exchange currency and execute the deal at some specific date in the future. Forward rates are typically quoted for 30, 90, or 180 days into the future. Currency swap - the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. Swaps are used when it is desirable to move out of one currency into another for a limited period without incurring foreign exchange rate risk.