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Forex Management

QuestionAnswer
What is Foreign Exchange? In the present Era of Globalization Trade takes place between two different countries having different currencies,the Value and price of the different currency is not same due to different economic development thus exchange of currency is Foreign Exchange
What is Foreign Exchange Risk? The unit of a Currency of Different countries fluctuate due to various reasons, so there is risk of Loss due to fluctuation in Value of Currency, this Risk is Forex Risk.
What is Foreign Exchange Risk Management? Foreign Exchange Risk (Loss) is Managed by Hedging Techniques like Forward Rates,Spot Rates or Money Market Operations.
How Many Types of Transaction are there in Forex Market? There are Four Types of Foreign Exchange Transaction Ready Transaction, Valu Tom Transaction Spot Transaction ,Forward Transaction
How is Currency Depreciated? Two points- Value and Quantity Decrease in the Value of Currency (Quantity Increases) more Domestic Units available in exchange of one unit of Foreign Currency,Less Expensive.
How is Currency Appreciated? LESS Quantity More Value, few Domestic units are available in exchange of one unit of Foreign Currency, thus More Expensive
What is Bid ,Ask and Spread? Bid Rate is the Bank Buying Rate at which Banks Buy Left Hand Currency Ask Rate is the Rate at Which Bank Sells Left Hand Currency The Difference Between Ask and Bid Rate is Spread
What is Money Market Operation Hedging Technique? MMO Hedging tool by using Spot Rate, if payment is Receivable we create a LIABILLTY in foreign Bank in foreign currency If money Payable we create an ASSET in Foreign Bank in Foreign Currency
What is Direct Quote? A direct Quote is a Home Currency Price for one unit of Foreign Currency 1$=Rs45
What is an Indirect Quote? An Indirect Quote is a Foreign Currency Price for One Unit of Home Currency 1Rs=0.022$
How to Convert Indirect Quote in Direct Quote? Indirect Quote is to be viewed from Currency point of View and NOT Country 1$=Rs45 it is Direct quote for $ and indirect quote for Rs Indirect Quote= 1 divide by /Direct Quote
What are points to be kept in mind while Bid, Ask Rate Determination in two way quote? Determine Left hand Currency Bid will be always less than Ask Rate What will BANK do whether BUY or SELL in Context to Left Hand Currency 1$=Rs45-47, lHC is $, Bid is 45 and Ask is 47
Created by: Devik