The departments and processes related to the settlement of financial transactions.
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Transaction where a loan is made in one currency against a loan denominated in another currency.
Financial statement showing a company’s assets, liabilities, and shareholders’ equity on a given date.
Balance of Payments
A systematic record of the economic transactions during a given period for a country. Can refer to either current account (which takes trade into account), capital account, or a combination thereof. Prolonged balance of payment deficits theoretically lead to currency depreciation.
Balance of Trade
Calculated by subtracting imports from exports. A negative balance of trade (when imports exceed exports) is called a "deficit," while a positive balance is known as a "surplus." The balance of trade is inversely related to the difference between savings and investment.
Bank of England
Central Bank for the UK, whose actions directly weigh on the value of the Pound Sterling.
A Line of credit provided by a bank.
Issued as legal tender; while they can sometimes be converted into currencies, they are generally excluded from the forex market.
A chart type consisting of four points: high price and low price (represented by a vertical bar), opening price (represented by a small horizontal line to the left of the bar), and closing price (represented by small horizontal line to the right of the bar).
A type of option whose value/survival depends on whether the underlying security.currency breaks a predetermined price level at any time during the life of the option. Depending on market conditions, it is variously referred to as Down and Out call/put, Down and in call/put, Up and out call/put, and/or Up and in call/put.
Currency in which the operating results of the bank or institution is reported.
Difference between the cash price and futures price.
The process whereby the basis tends towards zero as the contract expiration date nears.
One per cent of one per cent. For example, 25 basis points is equal to .25%.
The price expressed in terms of yield-to-maturity or rate of return, rather than the actual unit price.
The practice of taking opposing positions in the spot and futures markets with the goal of profiting from favorable changes between the two.
Group of currencies (as opposed to one single currency) normally used to peg/manage the exchange rate of another currency.
While precise standards vary, refers generally to prolonged period of falling asset prices.
Describes an an investor who believes that asset prices will fall.
Bear Put Spread
An options strategy that seeks to capitalize on a depreciating currency by buying a put option with a high strike price and selling one with a low strike price.
The price at which specific currency or contract can be sold. In practice, this can be understood as the number on the left side of the quote, which is usually the lower price. For example, in the quote EUR/USD 1.4122/26, the bid price is 1.4122; meaning you can sell one Euro for 1.4122 US dollars. Opposite of Ask/Offer price.
Refers to the first three digits of an exchange rate, such as the 2.30 in 2.3025. The big figure is often omitted in dealer quotes, such that a quote of "25/30" on dollar mark would indicate a price of 2.3025/2.3030.
In a system of limited foreign currency, payments are usually routed through the central bank, which is also charged with clearing the balance of payments.
The most common option pricing formula, which is based on a set of ideal assumptions that pertain mostly to the underlying security/currency.
Technical analysis tool used to measure the highness or lowness of the price relative to previous trades, consisting of three bands: middle band (simple moving average), upper band (given number of standard deviations above the middle band), and lower band (given number of standard deviations below the middle band)
Summary of a (professional) trader’s total positions; may also include gains and losses.
Refers to the location where the transaction is recorded, which may differ from the location/country of negotiation.
Break Even Point
The price at which the option buyer recovers the necessary premium paid, resulting in neither loss nor gain. With a call option, the break even point is simply the premium plus the strike price.
Break of Which (BOW)
Based on a series of predetermined levels, this describes the belief that if a price breaks a specific level, it will move towards the next level, and continue (upwards or downwards) if it then breaks through that level.
Describes a technical scenario in which a currency/security is seen to have exited a pre-existing pattern, such as a range or other trend.
Price gap that forms following breakout which often represents a (temporary) pricing inefficiency following a long period of consolidation.
1944 agreement that used the price of gold to fix exchange rates for major currencies. It was replaced in 1971 by a floating exchange rate system that remains in place today.
Describes deals involving non-standard periods.
An agent who executes orders to buy and sell currencies either for a commission or based on a bid/ask spread. In the foreign exchange market, brokers essentially serve as intermediaries between banks. This commission is known as the brokerage fee.
While precise standards vary, refers generally to prolonged period of rising asset prices.
Describes an an investor who believes that asset prices will rise.
An options strategy that seeks to capitalize on a (moderate) rise in exchange rates, executed typically by buying a call option with a low strike price and selling one with a high strike price. Also known as Buying the Spread.
Bonds issued in the UK by foreign institutions, denominated in British Pounds.
Refers to gold bars, as opposed to coins or indirect ownership of gold.
Central bank of Germany and most influential member of the European System of Central Banks (ESCB).
An options strategy in which options with different expiration dates and strike prices are bought and sold simultaneously against each other.
Refers to the buyer/holder of an option, who has the right
but not the obligation, to purchase the underlying security.