GEB 3373 Lecture Notes - Lecture 35: Bretton Woods System, Currency Future, Spot Contract

• School: University of Florida
• Department: Business Administration - General
• Course: GEB 3373
• Professor: Phalin Amanda

Document Summary

> hedge against unfavorable changes in forex rate for monies to be. Commercial customers use forex for their businesses paid/recorded in the future. Spe(cid:272)ulators hope to profit (cid:271)(cid:455) atte(cid:373)pti(cid:374)g to predi(cid:272)t (cid:272)ha(cid:374)ges i(cid:374) (cid:272)urre(cid:374)(cid:272)(cid:455)"s (cid:373)arket value. Arbitrageurs attempt to exploit extremely small differences in forex prices between markets market. Central banks/treasury departments intervene in forex markets. > harder to do i(cid:374) toda(cid:455)"s i(cid:374)sta(cid:374)ta(cid:374)eous, 24/7 (cid:373)arkets. > simultaneously buy currency in lower-price market & sell in high priced. Most international forex transactions are denominated in transaction currencies like the $, , , . Inconvertible currencies: not freely tradeable on international markets because domestic laws forbid it or foreign investors are unwilling to hold them. Convertible currencies: freely tradeable on international markets. > facilitate international trade and investment by allowing firms to hedge or. Forex transactions involving payment to be made in future. Forex markets are floating, not fixed (as they were under bretton woods system)