IB 201 Lecture Notes - Lecture 15: Foreign Exchange Market, Fixed Exchange-Rate System, International Monetary Systems

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Document Summary

How does a weaker or stronger dollar affect us firms business. Market in which currencies are bought and sold and their prices are determined: functions. To facilitate sales and purchase or invest directly abroad. Insure against potential losses form adverse exchange-rate changes. Instantaneous purchase and sale of a currency in different markets for profit. Sequential purchase and sale of vice-versa of a currency for profit: a market for national currencies. Facilitate trade and investment with exchange of currencies. Exchange rate in the price of a currency: two basic types of pricing systems to organize this market we learned earlier. Flexible and fixed (pegged) exchange rate systems. Market instruments and institutions: interbank market, vital for ib. Market in which the worlds largest banks exchange currencies at spot and forward rates. Process of aggregating the currencies that one bank owes another and then carrying out the transaction: securities exchange. Exchanging specializing in currency futures and options transactions: over-the-counter (otc) exchange.

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