04-11-2016, 11:13 AM
1464370656-Lecture3IntlFinance.pdf (Size: 1.1 MB / Downloads: 63)
Mechanics of Foreign Exchange
• Just as people in different countries speak different
languages, they also transact business in different
monies ($, €, ¥, or £), requiring conversion from
one type of money to another whenever business
crosses int’l borders.
• Foreign exchange is what we call the currency of
another country that is needed to carry out
international transactions.
• The market where currencies are exchanged is
called the foreign exchange (FOREX) market.
2
1a. The FOREX Market
• FOREX market is not a physical place but a
network of telephones, emails and faxes
connecting all the large banks (Citibank,
Chase Manhattan, B of A) in the world
• Operates 24 hours a day because major banks
have offices all over the world. Biggest
markets are in London, New York and Tokyo.
• Volumes traded daily are HUGE: $1.5 trillion
per day (100 times greater than volume of
trade).