SECURCAP | Glossary

Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Absolute Rate

The fixed portion of an interest-rate swap, expressed as a percentage rather than as a premium or a discount to a reference rate.

Accumulation/Distribution

A momentum indicator that attempts to gauge supply and demand by determining whether investors are generally "accumulating" (buying) or "distributing" (selling) a certain stock by identifying divergences between stock price and volume flow. It is calculated using the following formula:

Acc/Dist = ((Close – Low) – (High – Close)) / (High – Low) * Period's volume

ADF

In currencies, this is the abbreviation for the Andorran Franc.

Advance/Decline Index

A technical analysis tool that represents the total difference between the number of advancing and declining security prices. This index is considered one of the best indicators of market movements as a whole. Stock indexes such as the Dow Jones Industrial Average only tell us the strength of 30 stocks, whereas the advance/decline index can provide much more insight into the movements of the market.

Advance/Decline Index = (Advances – Declines) + Prior Advance/Decline Index Value

AED

In currencies, this is the abbreviation for the U.A.E. Dirham.

AFA

In currencies, this is the abbreviation for the Afghanistan Afghani.

ALL

In currencies, this is the abbreviation for the Albanian Lek.

American Currency Quotation

A direct quotation in the foreign exchange markets whereby the value of the American dollar is stated as a per-unit measure of a foreign currency. This type of quotation shows how much U.S. currency it takes to purchase one unit of foreign currency.

American Depositary Share (ADS)

A U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange. American Depositary Shares (ADSs) are issued by depository banks in the U.S. under agreement with the issuing foreign company; the entire issuance is called an American Depositary Receipt (ADR) and the individual shares are referred to as ADSs.

ANG

In currencies, this is the abbreviation for the Netherlands Antilles Guilder.

AON

In currencies, this is the abbreviation for the Angolan New Kwanza.

Arbitrage

The simultaneous purchase and sale of an asset in order to profit from a difference in the price. This usually takes place on different exchanges or marketplaces. Also known as a "riskless profit".

ARP

In currencies, this is the abbreviation for the Argentinean peso.

ARS

In currencies, this is the abbreviation for the Argentinean Nuevo Peso.

Asset Swap

Similar in structure to a plain vanilla swap, the key difference is the underlying of the swap contract. Rather than regular fixed and floating loan interest rates being swapped, fixed and floating investments are being exchanged.

At The Market

An order to buy or sell a futures contract at the best available price upon entrance into the exchange for execution.

ATS

In currencies, this is the abbreviation for the Austrian Schillings.

AUD

In currencies, this is the abbreviation for the Australian dollar.

Aussie

Slang term that is used to refer to the Australian dollar.

Authorized Forex Dealer

Any type of financial institution that has received authorization from a relevant regulatory body to act as a dealer involved with the trading of foreign currencies. Dealing with authorized forex dealers ensure that your transactions are being executed in a legal and just way.

AWG

In currencies, this is the abbreviation for the Aruba Guilder.

B

Balance Of Payments (BOP)

A record of all transactions made between one particular country and all other countries during a specified period of time. BOP compares the dollar difference of the amount of exports and imports, including all financial exports and imports. A negative balance of payments means that more money is flowing out of the country than coming in, and vice versa.

Bank For International Settlements (BIS)

An international organization fostering the cooperation of central banks and international monetary policy makers. Administers the transaction of monies according to the Treaty of Versailles

Bank Of Canada (BOC)

The central bank of Canada, influences the country's economy and money supply.

Bank Of Japan (BoJ)

The Bank of Japan is the Japanese central bank. The bank is responsible for issuing and handling currency and treasury securities, implementing monetary policy, maintaining the stability of the Japanese financial system, providing settling and clearing services.

Base Currency

The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency. It is sometimes referred to as the "primary currency".

BBD

In currencies, this is the abbreviation for the Barbados Dollar.

BDT

In currencies, this is the abbreviation for the Bangladesh Taka.

BGN

In currencies, this is the abbreviation for the Bulgarian Lev.

BHD

In currencies, this is the abbreviation for the Bahraini Dinar.

BIF

In currencies, this is the abbreviation for the Burundi Franc.

Big Figure

The stem, or whole dollar price, of a quote, often used in reference to foreign currencies or money markets.

Big Mac PPP

A survey done by The Economist that determines what a country's exchange rate would have to be for a Big Mac in that country to cost the same as it does in the United States. Purchase power parity (PPP) is the theory that currencies adjust according to changes in their purchasing power. With the Big Mac PPP, purchasing power is reflected by the price of a McDonald's Big Mac in a particular country. The measure gives an impression of how overvalued or undervalued a currency is.

Blocked Currency

Any currency that is mainly used for domestic transactions and does not freely trade on a forex market (usually due to government restrictions). Also referred to as a "nonconvertible currency".

Blotter

A record of trades and the details of the trades made over a period of time (usually one trading day). The details of a trade will include such things as the time, price, order size and a specification of whether it was a buy or sell order. The blotter is usually created through a trading software program that records the trades made through a data feed.

BMD

In currencies, this is the abbreviation for the Bermudian Dollar.

BND

In currencies, this is the abbreviation for the Brunei Dollar.

BOB

In currencies, this is the abbreviation for the Bolivian Boliviano.

Bretton Woods Agreement

A 1944 agreement made in Bretton Woods, New Hampshire, which helped to establish a fixed exchange rate in terms of gold for major currencies.

BRL

In currencies, this is the abbreviation for the Brazilian Real.

BSD

In currencies, this is the abbreviation for the Bahamanian Dollar.

BTN

In currencies, this is the abbreviation for the Bhutan Ngultrum.

Bull Put Spread

A type of options strategy that is used when the investor expects a moderate rise in the price of the underlying asset. This strategy is constructed by purchasing one put option while simultaneously selling another put option with a higher strike price. The goal of this strategy is realized when the price of the underlying stays above the higher strike price, which causes the short option to expire worthless, resulting in the trader keeping the premium.

Bundesbank

Refers to the central bank of Germany. This is the U.S. equivalent of the Federal Reserve.

BWP

In currencies, this is the abbreviation for the Botswana Pula.

BZD

In currencies, this is the abbreviation for the Belize Dollar.

C

Cable

In the context of the forex market, the exchange rate between the U.S. dollar and the British pound sterling. Because it is the norm in forex for most major currencies to be quoted against the U.S. dollar on a regular basis, "cable" is a commonly used term. "Cable" can also be used to refer simply to the British pound sterling.

CAD

In currencies, this is the abbreviation for the Canadian Dollar.

Cambist

An expert trader who rapidly buys and sells currency throughout the day.

Cash Delivery

The same-day settlement of a currency trade in the forex market. This means that delivery and settlement of the transaction occur on the same date that the currency trade is made. In order for this to occur, the forex position must be opened and closed within the same trading day. Also referred to as "same-day settlement".

Centralized Market

A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.

CHF

In currencies, this is the abbreviation for the Swiss franc.

China Investment Corporation (CIC)

A government-sponsored entity of the People's Republic of China that seeks to invest in securities and commodities abroad.

Choice Market

A market in which the spread between the bid and the ask for a given financial instrument is zero - meaning that, at any point in time, the instrument can be bought for the same price as it can be sold in the market. This type of market only occurs when there is extreme liquidity and a limited number of intermediaries.

Clearing

The procedure by which an organization acts as an intermediary and assumes the role of a buyer and seller for transactions in order to reconcile orders between transacting parties.

Clearing Price

The specified monetary value assigned to a security or asset. This price is determined by the bid and ask process of buyers and sellers interested in trading the security.

CLP

In currencies, this is the abbreviation for the Chili Peso.

CNY

In currencies, this is the abbreviation for the China Yuan Renminbi.

Commodity Block Currency

A currency that belongs to a country whose economy is strongly correlated with the price fluctuations of a certain commodity.

Compound Option

An option for which the underlying is another option. Therefore, there are two strike prices and two exercise dates. These are the four types of compound options:
- Call on a call
- Put on a put
- Call on a put
- Put on a call

Constant Currencies

An exchange rate that eliminates the effects of exchange rate fluctuations and that is used when calculating financial performance numbers. Companies with major foreign operations often use constant currencies when calculating their yearly performance measures.

COP

In currencies, this is the abbreviation for the Columbian Peso.

Country Basket

A derivative security designed to mimic the major index of an international exchange.

Cover On A Bounce

The covering of a short position after it has reached and bounced off a level of support. This strategy waits for the price to move to a support level, instead of selling before, to see if the level will hold (because the trader will benefit if it doesn't hold). Once the security bounces it is clear the security will have trouble moving down further so the trade covers their short position

Crawling Peg

A system of exchange rate adjustment in which a currency with a fixed exchange rate is allowed to fluctuate within a band of rates. The par value of the stated currency is also adjusted frequently due to market factors such as inflation. This gradual shift of the currency's par value is done as an alternative to a sudden and significant devaluation of the currency.

CRC

In currencies, this is the abbreviation for the Costa Rican Colon.

Credit Netting

A system whereby the number of credit checks on financial transactions is reduced by entering into agreements that simply net all transactions. These agreements are made between large banks and other financial institutions and place all current and future transactions into one agreement, removing the need for credit checks on each transaction.

Cross Currency

A pair of currencies traded in forex that does not include the U.S. dollar. One foreign currency is traded for another without having to first exchange the currencies into American dollars.

Cross Rate

The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided in.

CUP

In currencies, this is the abbreviation for the Cuban Peso.

Currency

A generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.

Currency Basket

A selected group of currencies whose weighted average is used as a measure of the value or the amount of an obligation. A currency basket functions as a benchmark for regional currency movements - its composition and weighting depends on its purpose

Currency Binary

A currency trade that offers an all-or-nothing payoff based on a given currency exchange rate when the position reaches its expiration date. Binaries have a single payoff amount rather than the variable profit amounts found in traditional options.

Binary trades can be used for either hedging purposes (such as downside protection for assets held in a specific currency) or as a speculative bet on the direction a specific exchange rate will move. The going premium on a currency binary represents the consensus "odds" that the strike exchange rate will be reached by expiration. An investor or trader can also sell (short) a currency binary position, reversing the payoff options and effectively betting that the exchange rate will fall.

Currency Carry Trade

A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates - which can often be substantial, depending on the amount of leverage the investor chooses to use.

Currency Certificate

A note that grants the holder the right to convert a specific amount of one currency to another at a given exchange rate until it expires. A currency certificate is a bearer certificate in that there is no registered owner. Currency certificates are a useful tool for hedging foreign exchange risk.

Currency Convertibility

The ease with which a country's currency can be converted into gold or another currency. Convertibility is extremely important for international commerce. When a currency in inconvertible, it poses a risk and barrier to trade with foreigners who have no need for the domestic currency.

Currency Forward

A forward contract in the forex market that locks in the price at which an entity can buy or sell a currency on a future date. Also known as "outright forward currency transaction", "forward outright" or "FX forward".

Currency Futures

A transferable futures contract that specifies the price at which a specified currency can be bought or sold at a future date.

Currency Internationalization

The widespread use of a currency outside the original country in which it was created for the purposes of conducting transactions between sovereign states. The level of currency internationalization for a currency is determined by the demand other countries have for that currency. This depends on the amount of business that is performed between the countries and/or the perceived value of the currency as a good store of value.

Currency Option

A contract that grants the holder the right, but not the obligation, to buy or sell currency at a specified exchange rate during a specified period of time. For this right, a premium is paid to the broker, which will vary depending on the number of contracts purchased. Currency options are one of the best ways for corporations or individuals to hedge against adverse movements in exchange rates.

Currency Overlay

The outsourcing of currency risk management to a specialist firm, known as the overlay manager. This is used in international investment portfolios to separate the management of currency risk from the asset allocation and security selection decisions of the investor's money managers.

Currency Pair

The quotation and pricing structure of the currencies traded in the forex market: the value of a currency is determined by its comparison to another currency. The first currency of a currency pair is called the "base currency", and the second currency is called the "quote currency". The currency pair shows how much of the quote currency is needed to purchase one unit of the base currency.

Currency Risk

A form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Currency Swap

A swap that involves the exchange of principal and interest in one currency for the same in another currency. It is considered to be a foreign exchange transaction and is not required by law to be shown on the balance sheet.

CVE

In currencies, this is the abbreviation for the Cape Verde Escudo.

CYP

In currencies, this is the abbreviation for the Cyprus Pound.

CZK

In currencies, this is the abbreviation for the Czech Koruna.

D

Daily Chart

A line graph that displays the intraday movements of a given security. This contrasts to longer term charts, such as those that show a security's movement over a period of days, months or even years.

Daily Cut-Off

In the forex market, a particular point in time specified by a forex dealer to stand as the end of the current trading day and the beginning of a new trading day. This is done for primarily administrative and logistical reasons, because although the forex market trades 24 hours a day, the market and its intermediaries require a specified beginning and end to each trading day in order to record trade dates and define settlement periods.

Daily Trading Limit

The maximum gain or loss on a derivative contract, such as options and futures contracts, that is allowed in any one trading session. The limits are imposed by the exchanges in order to protect against extreme volatility or manipulation within the markets.

Dayrate Volatility

The intraday volatility of an exchange rate (or price of a good or service), that changes due to imbalances in supply and demand. Price levels of various goods or services can change very quickly depending on the current market condition.

Decentralized Market

A market structure that consists of a network of various technical devices that enable investors to create a marketplace without a centralized location. In a decentralized market, technology provides investors with access to various bids/ask prices and makes it possible for them to deal directly with other investors/dealers rather than with a given exchange.

Deflation

A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression.

Depreciation

A decrease in the value of a particular currency relative to other currencies.

Devaluation

A deliberate downward adjustment to a country's official exchange rate relative to other currencies. In a fixed exchange rate regime, only a decision by a country's government (i.e. central bank) can alter the official value of the currency. Contrast to "revaluation".

Diamond Top Formation

A technical analysis reversal pattern that is used to signal the end of an uptrend. This relatively uncommon pattern is found by identifying a period in which the price trend of an asset starts to widen and then starts to narrow. This pattern is called a diamond because of the shape it creates on a chart.

Direct Quote

A foreign exchange rate quoted as the domestic currency per unit of the foreign currency. In other words, it involves quoting in fixed units of foreign currency against variable amounts of the domestic currency.

Dirty Float

A system of floating exchange rates in which the government or the country's central bank occasionally intervenes to change the direction of the value of the country's currency. In most instances, the intervention aspect of a dirty float system is meant to act as a buffer against an external economic shock before its effects become truly disruptive to the domestic economy. Also known as a "managed float".

DJF

In currencies, this is the abbreviation for the Djibourti Franc.

DKK

In currencies, this is the abbreviation for the Danish Krone.

Dollar Drain

A situation that occurs when a country imports more goods and services from another country than it exports back to the same country. The net effect of spending more money importing than is received from exporting causes a net reduction in the importing country's reserves of the exporting country's currency.

DOP

In currencies, this is the abbreviation for the Dominican Republic Peso.

Double No-Touch Option

A type of exotic option that gives an investor an agreed upon payout if the price of the underlying asset does not reach or surpass one of two predetermined barrier levels. An investor using this type of option pays a premium to his/her broker and in turn receives the right to choose the position of the barriers, the time to expiration, and the payout to be received if the price fails to breach either barrier. With this type of option, the maximum possible loss is just the cost of setting up the option.

A double no-touch option is the opposite of a double one-touch option.

Double One-Touch Option

A type of exotic option that gives an investor an agreed upon payout if the price of the underlying asset reaches or surpasses one of two predetermined barrier levels. An investor using this type of option is able to determine the position of both barriers, the time to expiration, and the payout to be received if the price does rise above one of the barriers. Either one of the barrier levels must be breached prior to expiration for the option to become profitable and for the buyer to receive the payout. If neither barrier level is breached prior to expiration, the option expires worthless and the trader loses all the premium paid to the broker for setting up the trade.

Dual Currency Deposit

A fixed deposit with variable terms for the currency of payment. Deposits are made in one currency, but withdrawals at maturity occur either in the currency of the initial deposit or in another agreed upon currency.

Dual Exchange Rate

A situation in which there is a fixed official exchange rate and an illegal market-determined parallel exchange rate. The different exchange rates are used in different situations, either in exchanges or evaluations, as mandated by the government.

Dutch Disease

An economic condition that, in its broadest sense, refers to negative consequences arising from large increases to a country's income. Dutch disease is primarily associated with a natural resource discovery, but it can result from any large increase in foreign currency, including foreign direct investment, foreign aid or a substantial increase in natural resource prices.

This condition arises when foreign currency inflows cause an increase in the affected country's currency. This has two main effects for the country with Dutch disease:
1. A decrease in the price competitiveness, and thus the exports, of its manufactured goods
2. An increase in imports

E

Earning The Points

A currency trading term that describes when the forward ask price is lower than the spot bid price, resulting in a gain for the trader. A trader is gaining the points when he or she sells at one price now then agrees to buy for less in the future. Gaining the point only refers to the difference between sell and buy prices and does not take the time value of money into account.

This is the opposite of "losing the points".

Economic Exposure

An exposure to fluctuating exchange rates, which affects a company's earnings, cash flow and foreign investments. The extent to which a company is affected by economic exposure depends on the specific characteristics of the company and its industry.

EEK

In currencies, this is the abbreviation for the Estonian Kroon.

EGP

In currencies, this is the abbreviation for the Egyptian Pound.

Either-Way Market

A condition that exists in the eurodollar interbank deposit market when the bid and offer rates for a particular period are equal. Increasing levels of liquidity can narrow the spread between bid and offer rates until the two values are identical, resulting in an either-way market.

Equity Linked Foreign Exchange Option (ELF-X)

A put or call option that protects an investor from foreign-exchange risk for a future sale or purchase of a specified foreign-equity portfolio.

ETB

In currencies, this is the abbreviation for the Ethiopian Birr.

EUR

In currencies, this is the abbreviation for the euro, and when written numerically, it looks like this: ¬100.

Euro

The official currency of the European Union's (EU) member states. The euro was introduced by the EU in to the financial community in 1999 and physical euro coins and paper notes were introduced in 2002. Euros are printed and managed by the European System of Central Banks (ESCB). The euro is abbreviated by the symbol "EUR".

Euro LIBOR

London Interbank Offer Rate denominated in euros. This is the interest rate that banks offer each other for large short-term loans in euros. The rate is fixed once a day by a small group of large London banks but fluctuates throughout the day. This market makes it easier for banks to maintain liquidity requirements because they are able to quickly borrow from other banks that have surpluses.

Euroclear

One of two principal clearing houses for securities traded in the Euromarket. Euroclear specializes in verifying information supplied by two brokers in a securities transaction and the settlement of securities. Euroclear is market owned and governed, and has previously acquired London Crest, Necigef Netherlands, Sicovam Paris and CIK Brussels.

Eurocommercial Paper

An unsecured, short-term loan issued by a bank or corporation in the international money market, denominated in a currency that differs from the corporation's domestic currency.

Eurocurrency Market

The money market in which Eurocurrency, currency held in banks outside of the country where it is legal tender, is borrowed and lent by banks in Europe. The Eurocurrency market allows for more convenient borrowing, which improves the international flow of capital for trade between countries and companies.

Euromarket

The market that includes all of the European Union member countries - many of which use the same currency, the euro. All tariffs between Euromarket member countries have been abolished, and import duties from all non-meber countries have been fixed for all of the member countries. The Euromarket also has one central bank for all of the member countries, the European Central Bank (ECB). Also known as "the common market".

European Central Bank (ECB)

The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed in Germany in June 1998 and works with the other national banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union.

European Currency Quotation

An indirect quotation in the foreign exchange markets whereby the value of a foreign currency is stated as a per-unit measure of the U.S. dollar. This type of quotation shows how much foreign currency it takes to purchase one U.S. dollar.

European Monetary System (EMS)

A 1979 arrangement between several European countries to link their currencies in an attempt to stabilize the exchange rate. This system was succeeded by the European Monetary Union (EMU), an institution of the European Union (EU), which established a common currency called the euro.

European Terms

A foreign exchange quoting convention where the domestic currency is quoted in terms of a foreign currency. In other words, it is the amount of foreign currency that one unit of the domestic currency can buy.

European Union (EU)

A group of European countries that participates in the world economy as one economic unit and operates under one official currency, the euro. The EU's goal is to create a barrier-free trade zone and to enhance economic wealth by creating more efficiency within its marketplace.

Euroyen

Japanese yen-denominated deposits held in banks outside Japan. Also a term that refers to yen traded in the Eurocurrency market.

Eurozone

A geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency. Also referred to as "euroland".

Exchange Control

Types of controls that governments put in place to ban or restrict the amount of foreign currency or local currency that is allowed to be traded or purchased. Common exchange controls include banning the use of foreign currency and restricting the amount of domestic currency that can be exchanged within the country.

Exchange Rate

The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another. For example, the higher the exchange rate for one euro in terms of one yen, the lower the relative value of the yen.

Exchange Stabilization Fund (ESF)

Money available to the U.S. Treasury Department primarily used for participating in the foreign-exchange market in an attempt to maintain currency stability. It holds U.S. dollars, foreign currencies and special drawing rights.

Exotic Currency

A foreign exchange term for a thinly traded currency. Exotic currencies are illiquid, lack market depth and trade at low volumes. Trading an exotic currency can be expensive, as the bid-ask spread is usually large.

F

Failure To Deliver

An outcome in a transaction where one of the counterparties in the transaction fails to meet their respective obligations. When failure to deliver occurs, either the party with the long position does not have enough money to pay for the transaction, or the party in the short position does not own the underlying assets that are to be delivered. Failure to deliver can occur in both equity and derivatives markets.

Finmins

Nickname given to the finance ministers from various countries who meet at global trade summits. Finance ministers are appointed and, depending on the country, the position can be given to an elected representative or to a non-elected official. The role played by a finance minister and the power he or she holds will vary among countries, but "finmins" are generally responsible for shaping or advising on the budget of a country and helping with other economic policies.

Fixed Exchange Rate

A country's exchange rate regime under which the government or central bank ties the official exchange rate to another country's currency (or the price of gold). The purpose of a fixed exchange rate system is to maintain a country's currency value within a very narrow band. Also known as pegged exchange rate.

Fixed-For-Fixed Swaps

An arrangement between two parties (known as counterparties) in which both parties pay a fixed interest rate that they could not otherwise obtain outside of a swap arrangement.

Fixed-For-Floating Swap

An advantageous arrangement between two parties (counterparties), in which one party pays a fixed rate, while the other pays a floating rate.

FJD

In currencies, this is the abbreviation for the Fiji Dollar.

FKP

In currencies, this is the abbreviation for the Falkland Islands Pound.

Flat

In forex, the condition of being neither long nor short in a particular currency. Also referred to as 'being square'.

Flat On A Failure

A strategy of closing out of a position and taking profits if the security in question moves up to a target level but fails to break through it. This can be seen as a method of extracting what profit a trade has been able to produce so far because the trader believes that further movement past the target level is unlikely.

Flip

A point when traders shift from having more long positions to having more short positions.

Floating Exchange Rate

A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies. Thus, floating exchange rates change freely and are determined by trading in the forex market. This is in contrast to a "fixed exchange rate" regime.

Foreign Currency Effects

The gain or loss on foreign investments due to changes in the relative value of assets denominated in a currency other than the principal currency with which a company normally conducts business. A rising domestic currency means foreign investments will result in lower returns when converted back to the domestic currency. The opposite is true for a declining domestic currency.

Foreign Exchange Dealers Association Of India (FEDAI)

An association of banks specializing in the foreign exchange activities in India. The Foreign Exchange Dealers Association of India, which was created in 1958, regulates the governing rules and determines the commissions and charges associated with the interbank foreign exchange business.

Foreign Official Dollar Reserves (FRODOR)

A term coined by economist Ed Yardeni relating international liquidity to the effect of foreign central banks on U.S. monetary policy. It is measured as the sum of U.S. Treasury and U.S. agency securities held by foreign banks.

Foreign-Exchange Risk

1. The risk of an investment's value changing due to changes in currency exchange rates.

2. The risk that an investor will have to close out a long or short position in a foreign currency at a loss due to an adverse movement in exchange rates. Also known as "currency risk" or "exchange-rate risk".

Forex (FX)

The market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.

Forex Futures

An exchange-traded contract to buy or sell a specified amount of a given currency at a predetermined price on a set date in the future. All forex futures are written with a specific termination date, at which point delivery of the currency must occur unless an offsetting trade is made on the initial position.

Forward Discount

In a foreign exchange situation where the domestic current spot exchange rate is trading at a higher level then the current domestic futures spot rate for a maturity period. A forward discount is an indication by the market that the current domestic exchange rate is going to depreciate in value against another currency.

Forward Points

The number of basis points added to or subtracted from the current spot rate to determine the forward rate. When points are added to the spot rate, there is a forward points premium; when points are subtracted from the spot rate, there is a points discount.

Forward Premium

When dealing with foreign exchange (FX), a situation where the spot futures exchange rate, with respect to the domestic currency, is trading at a higher spot exchange rate then it is currently. A forward premium is frequently measured as the difference between the current spot rate and the forward rate, but any expected future exchange rate will suffice.

Forward Rate Agreement (FRA)

An over-the-counter contract between parties that determines the rate of interest, or the currency exchange rate, to be paid or received on an obligation beginning at a future start date. The contract will determine the rates to be used along with the termination date and notional value. On this type of agreement, it is only the differential that is paid on the notional amount of the contract. Also known as a "future rate agreement".

G

GBP

In the currency market, this is the abbreviation for the British pound.

GHC

In the currency market, this is the abbreviation for the Ghanian Cedi.

GIP

In currencies, this is the abbreviation for the Gibraltar Pound.

GMD

In currencies, this is the abbreviation for the Gambian Dalasi.

GNF

In currencies, this is the abbreviation for the Guinea Franc.

Gnomes of Zurich

A term used by British labor ministers during the 1964 Sterling Crisis to refer to Swiss banks.

Gold Standard

A monetary system in which a country's government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies. The gold standard was mainly used from 1875 to 1914 and also during the interwar years.

GTQ

In currencies, this is the abbreviation for the Guatemala Quetzal.

GYD

In currencies, this is the abbreviation for the Guyanese Dollar.

H

Harami Cross

A trend indicated by a large candlestick followed by a doji that is located within the top and bottom of the candlestick's body. This indicates that the previous trend is about to reverse.

Hard Currency

A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex market.

Hard Money

Describes gold/silver/platinum (bullion) coins. A government that uses a hard money policy backs the value of the currency it uses with a hard, tangible and lasting material that will retain its relative value over time.

HKD

A common acronym for the Hong Kong dollar, which is the currency of Hong Kong. It is pegged to the U.S. dollar through the use of a linked exchange rate system, where US$1 is kept in a range of HKD$7.75- $7.85.

HNL

In currencies, this is the abbreviation for the Honduran Lempira.

HTG

In currencies, this is the abbreviation for the Haitian Gourde.

HUF

In currencies, this is the abbreviation for the Hungarian Forint.

I

IDR

In currencies, this is the abbreviation for the Indonesian Rupiah.

ILS

In currencies, this is the abbreviation for the Israeli New Shekel.

Inconvertible Currency

A situation where one currency cannot be exchanged for another currency because of foreign exchange regulations or physical barriers. Inconvertible currencies may be restricted from trade due to extremely high volatility or political sanctions.

Indicative Quote

In forex trading, a currency quote that is provided by a market maker to a trading party but that is not firm. In other words, when a market maker provides an indicative quote to a trader, the market maker is not obligated to trade the given currency pair at the price or the quantity stated in the quote. Contrast this to a firm quote, in which a market maker guarantees a specified bid or ask price to a trader up to the maximum quantity specified in the quote.

Indirect Quote

A foreign exchange rate quoted as the foreign currency per unit of the domestic currency. In an indirect quote, the foreign currency is a variable amount and the domestic currency is fixed at one unit.

Initial Claims

A measurement of the number of jobless claims filed by individuals seeking to receive state jobless benefits. This number is watched closely by financial analysts because it provides insight into the direction of the economy. Higher initial claims positively correlate with a weakening economy, and vice versa for lower initial claims.

INR

In currencies, this is the abbreviation for the Indian Rupee.

Interbank Market

The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties. While some interbank trading is performed by banks on behalf of large customers, most interbank trading takes place from the banks' own accounts.

Interbank Rate

The rate of interest charged on short-term loans made between banks. Banks borrow and lend money in the interbank market in order to manage liquidity and meet the requirements placed on them. The interest rate charged depends on the availability of money in the market, on prevailing rates and on the specific terms of the contract, such as term length.

Interest Rate Differential (IRD)

A differential measuring the gap in interest rates between two similar interest-bearing assets. Traders in the foreign exchange market use interest rate differentials when pricing forward exchange rates. Based on the interest rate parity, a trader can create an expectation of the future exchange rate between two currencies and set the premium (or discount) on the current market exchange rate futures contracts.

Interest Rate Parity

A theory that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange rates.

International Fisher Effect (IFE)

An economic theory that states that an expected change in the current exchange rate between any two currencies is approximately equivalent to the difference between the two countries' nominal interest rates for that time.

E = I1 – I2 ≈ i1 – i2
1 + i2

Calculated as:
Where:
"E" represents the % change in the exchange rate
"i1" represents country A's interest rate
"i2" represents country B's interest rate

International Foreign Exchange Master Agreement (IFEMA)

An agreement set forth by the Foreign Exchange Committee that reflects the best practices for transactions in the foreign exchange market. IFEMA was published in 1997 and sponsored by the British Bankers Association, Canadian Foreign Exchange Committee and the Tokyo Foreign Exchange Market Practices Committee.

International Monetary Fund (IMF)

An international organization created for the purpose of:
1. Promoting global monetary and exchange stability.
2. Facilitating the expansion and balanced growth of international trade
3. Assisting in the establishment of a multilateral system of payments for current transactions.

Inward Arbitrage

A form of arbitrage involving rearranging a bank's cash by borrowing from the interbank market, and re-depositing the borrowed money locally at a higher interest rate. The bank will make money on the spread between the interest rate on the local currency, and the interest rate on the borrowed currency.

IQD

In currencies, this is the abbreviation for the Iraqi Dinar.

IRR

In currencies, this is the abbreviation for the Iranian Rial.

ISK

In currencies, this is the abbreviation for the Iceland Krona.

ISO Currency Code

The internationally standardized three-letter abbreviation for a country's currency.

J

JMD

In currencies, this is the abbreviation for the Jamaican Dollar.

JOD

In currencies, this is the abbreviation for the Jordanian Dina.

K

KES

In currencies, this is the abbreviation for the Kenyan Shilling.

KHR

In currencies, this is the abbreviation for the Cambodian Riel.

Kiwi

A slang term for the New Zealand dollar (NZD). It derives its name from New Zealand's national icon - a flightless bird called a kiwi - which is pictured on one side of the country's $1 coin.

KMF

In currencies, this is the abbreviation for the Comoros Franc.

KPW

In currencies, this is the abbreviation for the North Korean Won.

KRW

In currencies, this is the abbreviation for the Korean Won.

KWD

In currencies, this is the abbreviation for the Kuwaiti Dinar.

KYD

In currencies, this is the abbreviation for the Cayman Islands Dollar

KZT

In currencies, this is the abbreviation for the Kazakhstan Tenge.

L

LAK

In currencies, this is the abbreviation for the Laos Kip

Law Of One Price

The theory that the price of a given security, commodity or asset will have the same price when exchange rates are taken into consideration. The law of one price is another way of stating the concept of purchasing power parity.

Lawful Money

Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves. Fiat money includes legal tender such as paper money, checks, drafts and bank notes. Also known as "specie", which means "in actual form."

LBP

In currencies, this is the abbreviation for the Lebanese Pound.

Leads And Lags

The alteration of normal payment or receipts in a foreign exchange transaction because of an expected change in exchange rates. An expected increase in exchange rates is likely to speed up payments, while an expected decrease in exchange rates will probably slow them down.

Linked Exchange Rate System

A system of managing a nation's currency and exchange rate by linking the national currency to another base currency that is held at a fixed ratio in deposit at domestic banks.

Once the exchange rate is set, there is typically no interference from the government or through monetary policy decisions that will affect the exchange rate. Currency is only issued when there are reserves in the linked currency to back it up. If the exchange rate begins to shift from the fixed ratio, currency is immediately added to or taken out of circulation to bring the ratio back into balance.

Liquidation Level

In forex trading, the specific value of a trader's account below which the liquidation of the trader's positions is automatically triggered and executed at the best available exchange rate at the time. The liquidation level is expressed as a percentage value of assets. If a forex trader's positions go against him or her, his or her account will eventually reach the liquidation level, unless the trader contributes further margin to top up his or her account.

LKR

In currencies, this is the abbreviation for the Sri Lankan Rupee.

Loonie

A slang term for a Canadian dollar. It is derived from the picture of a loon on one side of the coin.

Losing The Points

A currency trading term that describes when the banks' buying price in the forward market is lower than the selling price in the spot market. A trader is losing the points when he or she buys at one price now and then agrees to sell for less in the future. This is the opposite of earning the points.

LRD

In currencies, this is the abbreviation for the Liberian Dollar.

LSL

In currencies, this is the abbreviation for the Lesotho Loti.

LTL

In currencies, this is the abbreviation for the Lithuanian Litas.

LVL

In currencies, this is the abbreviation for the Latvian Lat.

LYD

In currencies, this is the abbreviation for the Libyan Dinar.

M

MAD

In currencies, this is the abbreviation for the Moroccan Dirham.

Mine and Yours

Terms used by floor traders to signify buying and selling. Mainly used in forex transactions.

Minimum Price Contract

A forward contract with a provision guaranteeing a minimum price at delivery of the underlying agricultural commodity.

MMK

In currencies, this is the abbreviation for the Myanmar Kyat.

MNT

In currencies, this is the abbreviation for the Mongolian Tughrik.

Monetary Base

The total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank's reserves. This measure of the money supply typically only includes the most liquid currencies. Also known as the "money base".

Monetary Policy

The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates.

Monetary Reserve

A nation's assets in foreign currency and/or commodities like gold and silver, which are used to back up the national currency. Monetary reserves also provide a cushion for executing central banking functions like adding to the money supply and settling foreign exchange contracts in local currencies.

Money Supply

The entire quantity of bills, coins, loans, credit and other liquid instruments in a country's economy.

MOP

In currencies, this is the abbreviation for the Macau Pataca

MRO

In currencies, this is the abbreviation for the Mauritanian Ouguiya.

MTL

In currencies, this is the abbreviation for the Maltese Lira.

MUR

In currencies, this is the abbreviation for the Mauritius Rupee.

MVR

In currencies, this is the abbreviation for the Maldive Rufiyaa.

MWK

In currencies, this is the abbreviation for the Malawi Kwacha.

MXN

In the currency market, this is the abbreviation for the Mexican peso.

MYR

In currencies, this is the abbreviation for the Malaysian Ringgit

MZM

In currencies, this is the abbreviation for the Mozambique Metical.

N

NAD

In currencies, this is the abbreviation for the Namibia Dollar.

NGN

In currencies, this is the abbreviation for the Nigerian Naira.

NIO

In currencies, this is the abbreviation for the Nicaraguan Cordoba

NOK

In currencies, this is the abbreviation for the Norwegian Krone.

Nominal Effective Exchange Rate (NEER)

The unadjusted weighted average value of a country's currency relative to all major currencies being traded within an index or pool of currencies. The weights are determined by the importance a home country places on all other currencies traded within the pool, as measured by the balance of trade.

Nonconvertible Currency

Any currency that is used primarily for domestic transactions and is not openly traded on a forex market. This usually is a result of government restrictions, which prevent it from being exchanged for foreign currencies. Also known as a "blocked currency".

Noon Rate

A term used by the Bank of Canada to describe the foreign exchange rate between the U.S. dollar and the Canadian dollar. The rate is released by 12:45pm EST by the Bank of Canada on any given day, and is based on the trading that takes place from 11:59am to 12:01pm on that day. The noon rate is often used by companies as a benchmark for translating financial statements.

Nostro Account

An account that a bank holds with a foreign bank.

NPR

In currencies, this is the abbreviation for the Nepal Rupee.

NZD

In the currency market, this is the abbreviation for the New Zealand dollar.

O

OMR

In currencies, this is the abbreviation for the Oman Rial.

One-Touch Option

A type of exotic option that gives an investor a payout once the price of the underlying asset reaches or surpasses a predetermined barrier. This type of option allows the investor to set the position of the barrier, the time to expiration and the payout to be received once the barrier is broken. Only two outcomes are possible with this type of option:
1) the barrier is breached and the trader collects the full payout agreed upon at the outset of the contract, OR
2) the barrier is not breached and the trader loses the full premium paid to the broker.

Outward Arbitrage

A form of arbitrage involving the rearrangement of a bank's cash by taking its local currency and depositing it into eurobanks. The interest rate will be higher in the interbank market, which will enable the bank to earn more on the interest it receives for the use of its cash.

Overnight Trading

The buying or selling of currencies between 9pm and 8am local time. This type of transaction occurs when an investor takes a position at the end of the trading day in a foreign market that will be open while the local market is closed. The trade will be executed sometime that evening or early morning.

P

PAB

In currencies, this is the abbreviation for the Panama Balboa.

Panel Bank

The name given to the group of banks contributing to the EURIBOR. This group is made up of the largest participants within the Euro money Market.

Parallel Loan

A type of foreign exchange loan agreement that was a precursor to currency swaps. A parallel loan involves two parent companies taking loans from their respective national financial institutions and then lending the resulting funds to the other company's subsidiary.

Pegging

A method of stabilizing a country's currency by fixing its exchange rate to that of another country.

PEN

In currencies, this is the abbreviation for the Peruvian Nuevo Sol.

PGK

In currencies, this is the abbreviation for the Papua New Guinea Kina.

PHP

In currencies, this is the abbreviation for the Philippine Peso.

Pip

The smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100th of one percent, or one basis point.

PKR

In currencies, this is the abbreviation for the Pakistani Rupee.

PLN

In currencies, this is the abbreviation for the Polish Zloty.

Pre-Settlement Risk

The risk that one party of a contract will fail to meet the terms of the contract and default before the contract's settlement date, prematurely ending the contract. This type of risk can lead to replacement-cost risk.

Purchasing Power Parity (PPP)

An economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power. The relative version of PPP is calculated as:
S = P1 + P2

Where:
"S" represents exchange rate of currency 1 to currency 2
"P1" represents the cost of good "x" in currency 1
"P2" represents the cost of good "x" in currency 2

PYG

In currencies, this is the abbreviation for the Paraguay Guarani.

Q

QAR

In currencies, this is the abbreviation for the Qatar Riyal.

Quanto Swap

A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.

Quote Currency

The second currency quoted in a currency pair in forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic currency.

R

Real Effective Exchange Rate (REER)

The weighted average of a country's currency relative to an index or basket of other major currencies adjusted for the effects of inflation. The weights are determined by comparing the relative trade balances, in terms of one country's currency, with each other country within the index.

Redenomination

The process whereby a country's currency is recalibrated due to significant inflation and currency devaluation. Certain currencies have been redenominated a number of times over the last century for various reasons.

Repatriation

The process of converting a foreign currency into the currency of one's own country. The amount that the investor will receive depends on the exchange rate between the two currencies being traded at the settlement time.

Reserve Currency

A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate.

Revaluation

A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. central bank) can alter the official value of the currency. Contrast to "devaluation".

Revaluation Rates

Market currency rates from a specific point in time that are used as a base value by currency traders to assess whether a profit or a loss has been realized for the day. In most cases, the revaluation rate is the closing rate for the previous trading day.

RON

In currencies, this is the abbreviation for the Romanian New Leu.

RUB

In currencies, this is the abbreviation for the Russian ruble.

S

SAR

In currencies, this is the abbreviation for the Saudi Riyal.

SBD

In currencies, this is the abbreviation for the Solomon Islands Dollar

SCR

In currencies, this is the abbreviation for the Seychelles Rupee.

SDD

In currencies, this is the abbreviation for the Sudanese Dinar.

SDP

In currencies, this is the abbreviation for the Sudanese Pound

Seigniorage

The difference between the value of money and the cost to produce it - in other words, the economic cost of producing a currency within a given economy or country. If the seigniorage is positive, then the government will make an economic profit; a negative seigniorage will result in an economic loss.

SEK

In currencies, this is the abbreviation for the Swedish Krona.

Settlement Period

The period of time between the settlement date and the transaction date that is allotted to the parties of a transaction to satisfy the transaction's obligations. The buyer must make payment within the settlement period, while the seller must deliver the purchased security within this period.

Settlement Risk

The risk that one party will fail to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the risk associated with default at settlement and any timing differences in settlement between the two parties. This type of risk can lead to principal risk.

SGD

In currencies, this is the abbreviation for the Singapore Dollar.

SHP

In currencies, this is the abbreviation for the St. Helana Pound

Single Payment Options Trading (SPOT)

A type of option product that allows an investor to set not only the conditions that need to be met in order to receive a desired payout, but also the size of the payout he or she wishes to receive if the conditions are met. The broker that provides this product will determine the likelihood that the conditions will be met and, in turn, will charge what it feels is an appropriate commission. This type of arrangement is often referred to as a "binary option" because only two types of payouts are possible for the investor:
1. The conditions set out by both parties occur, and the investor collects the agreed-upon payout amount.
2. The event does not occur and the investor loses the full premium paid to the broker.

SIT

In currencies, this is the abbreviation for the Slovenian Tolar.

SKK

In currencies, this is the abbreviation for the Slovak Koruna.

SLL

In currencies, this is the abbreviation for the Sierra Leone Leone.

SLR

In currencies, this is the abbreviation for the Sri Lankan rupee.

Soft Currency

Another name for "weak currency". The values of soft currencies fluctuate often, and other countries do not want to hold these currencies due to political or economic uncertainty within the country with the soft currency.

SOS

In currencies, this is the abbreviation for the Somali Shilling.

Sovereign Risk

The risk that a foreign central bank will alter its foreign-exchange regulations thereby significantly reducing or completely nulling the value of foreign-exchange contracts.

Special Drawing Rights (SDR)

An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs are designed to augment international liquidity by supplementing the standard reserve currencies.

Speculator

A person who trades derivatives, commodities, bonds, equities or currencies with a higher-than-average risk in return for a higher-thanaverage profit potential. Speculators take large risks, especially with respect to anticipating future price movements, in the hope of making quick, large gains.

Spot Exchange Rate

The rate of a foreign-exchange contract for immediate delivery. Also known as "benchmark rates", "straightforward rates" or "outright rates", spot rates represent the price that a buyer expects to pay for a foreign currency in another currency.

Spot Trade

The purchase or sale of a foreign currency or commodity for immediate delivery. Spot trades are settled "on the spot", as opposed to at a set date in the future. Also known as "cash trades".

Futures transactions that expire in the current month are also known as spot trades because in the case that goods are actually delivered, delivery time is reasonably expected to take one month.

SRD

In currencies, this is the abbreviation for the Suriname Dollar.

STD

In currencies, this is the abbreviation for the Sao Tome/Principe Dobra.

Sterilization

A form of monetary action in which a central bank or federal reserve attempts to insulate itself from the foreign exchange market to counteract the effects of a changing monetary base. The sterilization process is used to manipulate the value of one domestic currency relative to another, and is initiated in the forex market.

Sterilized Intervention

A method used by monetary authorities to equalize the effects of foreign exchange transactions on the domestic monetary base by offsetting the purchase or sale of domestic assets within the domestic markets. The process limits the amount of domestic currency available for foreign exchange.

SVC

In currencies, this is the abbreviation for the El Salvador Colon.

Swissie

A slang term for the Swiss franc. The Swiss franc, or Swissie, has often been considered a safe-haven currency during times of geopolitical unrest. This is mainly due to the country's neutral stance in global conflicts.

SYP

In currencies, this is the abbreviation for the Syrian Pound.

SZL

In currencies, this is the abbreviation for the Swaziland Lilangeni.

T

Take-Profit Order (T/P)

An order used by currency traders specifying the exact rate or number of pips from the current price point where to close out their current position for a profit. The rate deemed to be the level where the trader wants to take a profit is sometimes referred to as the "take-profit point".

Temporal Method

A method of foreign currency translation that uses exchange rates based on the time assets and liabilities are acquired or incurred. The exchange rate used also depends on the method of valuation that is used. Assets and liabilities valued at current costs use the current exchange rate and those that use historical exchange rates are valued at historical costs.

THB

In currencies, this is the abbreviation for the Thai Baht.

Thin Market

A market with a low number of buyers and sellers. Since few transactions take place in a thin market, prices are often more volatile and assets are less liquid. The low number of bids and asks will also typically result in a larger spread between the two quotes. Also known as a "narrow market".

TND

In currencies, this is the abbreviation for the Tunisian Dinar.

Tomorrow Next (Tom Next)

In currency transactions, the purchase and sale of a currency made to avoid taking actual delivery of the currency. The current position is closed out at the daily close rate and re-entered at the new opening rate the next trading day. Also referred to as "tomorrow next procedure".

TOP

In currencies, this is the abbreviation for the Tonga P'anga

Transaction Exposure

The risk, faced by companies involved in international trade, that currency exchange rates will change after the companies have already entered into financial obligations. Such exposure to fluctuating exchange rates can lead to major losses for firms.

Transaction Risk

The exchange rate risk associated with the time delay between entering into a contract and settling it. The greater the time differential between the entrance and settlement of the contract, the greater the transaction risk, because there is more time for the two exchange rates to fluctuate.

TRL

In currencies, this is the abbreviation for the Turkish New Lira.

TTD

In currencies, this is the abbreviation for the Trinidad & Tobago Dollar.

TWD

In currencies, this is the abbreviation for the Taiwan Dollar.

Two-Way Quote

A type of quote that gives both the bid and the ask price of a security, informing would-be traders of the current price at which they could buy or sell the security. The two-way quote also shows the spread between the bid and the ask, giving traders an idea of the current liquidity in the security (a smaller spread indicates more liquidity).

TZS

In currencies, this is the abbreviation for the Tanzanian Shilling.

U

U.S. Dollar Index (USDX)

A measure of the value of the U.S. dollar relative to majority of its most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.

UAH

In currencies, this is the abbreviation for the Ukraine Hryvnia.

UGX

In currencies, this is the abbreviation for the Uganda Shilling

Uncovered Interest Rate Parity (UIP)

A parity condition stating that the difference in interest rates between two countries is equal to the expected change in exchange rates between the countries’ currencies. If this parity does not exist, there is an opportunity to make a profit.

(i1 – i2) = E (e)

"i1" represents the interest rate of country 1
"i2" represents the interest rate of country 2
"E(e)" represents the expected rate of change in the exchange rate

Unsterilized Foreign Exchange Intervention

An attempt by a country's monetary authorities to influence exchange rates and its money supply by not buying or selling domestic or foreign currencies or assets. This is a passive approach to exchange rate fluctuations, and allows for fluctuations in the monetary base.

USD