Académique Documents
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Submitted by:
Moses, Kiran, Indu, Jothika and Megha.
Indu
jothika
Exchange rate:
Exchange rate is the price of the currency of a country can be exchanged for the number of
units of currency of another country.it is the rate at which one unit of currency of a country
can be exchanged for the number of units of currency of another country.
Factors influencing forex
National economic performance
Central bank policy
Interest rates
Trade balances
Political factors
Market sentiment
Unforeseen events
Types of forex
Fixed and floating exchange rates
Direct and indirect exchange rates
Buying and selling
Spot and forward
Option and futures
Swap
Non-Deliverable Forward(NDF)
Moses
Theories of forex:
Theories which determine the prices of forex rate considering inflation, interest rate and
elasticity of price etc.
Methods:
a) long run theory
b) short run theory
c) interest rate parity theory
Risk involved with forex
1. Exposure to exchange rate movement
2. Any sale or purchase of foreign currency entails risk
3. It affects net asset or net liability position of the buyer/seller.
Kiran