Term
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Definition
| The price of one currency in another currency |
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Term
| Appreciation ( of a currency) |
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Definition
| An increase in the value of a currency |
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Term
| Depreciation ( of a currency) |
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Definition
| A decrease in the value of a currency |
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Term
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Definition
| A market where individuals, firms , governments and banks buy and sell foreign currencies |
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Term
| Purchasing power parity (PPP) hypothesis |
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Definition
| Hypothesis suggesting that, in the long run , baskets of goods would cost the same in all currencies (' law of one price') |
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Term
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Definition
| Hypothesis suggesting that changes in exchange rates will be proportional to differences in inflation rates |
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Term
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Definition
| The ( average) change of prices over time |
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Term
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Definition
| Hypothesis suggesting that the interest rate in two currencies should be the same after accounting for spot and forward in exchange rates |
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Term
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Definition
| The exchange rate for immediate payment |
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Term
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Definition
| A currency exchange transaction in which participants buy and sell currencies now for future delivery, typically in 30, 90 or 180 days, after the date of the transaction. |
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Term
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Definition
| The exchange rate for forward transactions |
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Term
| Balance of payments (BoP) |
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Definition
| A country's international transaction statement including merchandise trade, service trade and capital movement |
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Term
| Current account of ( of the BoP) |
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Definition
| Exports and imports of goods and services |
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Term
| Capital and financial account ( of the BoP) |
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Definition
| Sales and purchases of financial assets |
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Term
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Definition
| The result of investors moving as a herd in the same direction at the same time |
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Term
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Definition
| A phenomenon in which a large number of individuals and companies exchange domestic currencies for a foreign currency |
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Term
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Definition
| A system in which the value of most major currencies was maintained by fixing their prices in terms of gold, which served as the common denominator |
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Term
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Definition
| A system in which all currencies were pegged at a fixed rate to the US dollar |
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Term
| International Monetary Fund (IMF) |
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Definition
| International organisation that provides financial assistance to countries experiencing temporary imbalances in their balance of payment and helps securing macroeconomic stability |
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Term
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Definition
| International organisation that provides loans for specific projects in developing countries |
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Term
| Exchange rate risk ( or currency risk) |
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Definition
| The risk of financial losses because of unexpected changes in exchange rates |
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Term
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Definition
| Organising activities in such a way that currencies of revenues and expenditures match |
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Term
| Currency risk diversification |
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Definition
| Reducing overall risk exposure by working with a number of different currencies |
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Term
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Definition
| A transaction that protects traders and investors from exposure to the fluctuations of the spot rate |
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Term
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Definition
| A condition under which the forward rate of one currency relative to another currency is higher than the spot rate |
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Term
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Definition
| A condition under which the forward rate of one currency relative to another currency is lower than the spot rate |
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Term
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Definition
| A currency exchange transaction between two firms in which one currency is converted into another in Time 1, with an agreement to revert it back to the orginal currency at specific Time 2 in the future |
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Term
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Definition
| The price offered to sell a currency |
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Term
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Definition
| The price offered to buy a currency |
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Term
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Definition
| The difference between the offered price and the bid price |
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Term
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Definition
| The risk of a business partner not being able to fulfil a contract |
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