What Are Blocked Funds? Exploring the Concept and Applications Introduction In the realm of finance and banking, the term “blocked funds” refers to funds that are temporarily restricted or placed on hold by financial institutions or regulatory authorities. This article aims to provide a comprehensive understanding of what blocked funds are, their types, reasons for… Read More »
What Do You Mean by 90-Day Forward Exchange Rate? Introduction In the world of international finance and foreign exchange, forward exchange rates play a crucial role in determining future currency values. Among these, the 90-day forward exchange rate holds particular significance. This article aims to provide a comprehensive understanding of what the 90-day forward exchange… Read More »
Introduction In the world of international finance, two terms that often come up are Eurobond and foreign bond. While they may sound similar, there are distinct differences between these types of bonds. This article aims to shed light on the variances and similarities between Eurobonds and foreign bonds. Definition of Eurobond A Eurobond refers to… Read More »
What Is Eurodollar? What Is Eurodollar? The Eurodollar market plays a significant role in international finance, serving as a key component of the global financial system. In this article, we will explore what Eurodollars are, their importance in the global economy, and their impact on various aspects of international trade and finance. Introduction The term… Read More »
OVERSOLD POSITION Where the liabilities and sales of a bank in a particular foreign currency exceed the assets and purchase of the same currency the bank is said to have a “short” or “oversold” in that currency. if the bank maintains an “oversold” position in a particular currency and there occurs an appreciation of the… Read More »
What is a fixed forward? Fixed Forward is a type of forward exchange contract which provides for taking up or delivery of the foreign currency on a fixed data in the future, while the rate of exchange is agreed upon at the time of execution of the contract. What is Option Forward? Option Forward is… Read More »
Overbought and Oversold Overbought means that a bank’s assets and purchases of a particular foreign currency exceed its liabilities and sales of that currency. Where oversold means that a bank’s liabilities and sales in a particular foreign currency exceed the’ assets and purchases of that currency. In order to avoid risk on account of exchange… Read More »
Interest rates and Exchange rates The question of interest rate arises when currencies are borrowed or lent; whereas exchange rates are involved when different currencies are being bought or sold. Exchange rates are subject to more frequent fluctuations than interest rates. Interest rate is a factor that affects exchange rates. High interest rates cause speculative… Read More »
Hedging and speculating Hedging means avoiding or covering foreign exchange risk. The need for hedging arises because exchange rates fluctuate continuously. Accordingly, individuals, companies and banks who expect to make or receive payments in foreign currencies at a future data face the risk of having to pay more or receiving less in domestic currency than… Read More »
Pips & points: A point is a unit of decimal, the fourth place to the right of the decimal (0.0001) whereas a pip is the fifth place to the right (0.0001). One point is one ten thousandth of a dollar thus, 100 points become one cent. Which decimal place is implied by a point varies… Read More »