The concept of type conversion operations on the Forex is closely intertwined with the terminology of financial instruments. In financial markets, which in addition to Forex also includes the gold market, the credit market and the securities market, under the financial instruments refers to methods of financial transactions. Next will be considered only financial instruments related to the international Forex market. The rest of the financial markets and financial instruments beyond subject information portal forexanewway and beyond will not be considered. Types of conversion transactions (financial instruments related to Forex) are shown in Fig.
Conversion operations - a deal Forex participants to exchange a specified amount of currency of one country for currency of another country on a certain date at a fixed quote. Conversion operations Forex different value date, ie, delivery date currency relative to the date of the transaction of purchase / sale of foreign currency. On this basis conversion operations can be divided into two categories, as shown below:
operations such as spot (spot) or current conversion operations; forward (forward) conversion operations.
The largest volume of transactions in the Forex hold operations such as spot (spot). It is working on Forex to these transactions is considered on the information portal forexanewway. In international practice, it is assumed that the value date of transactions such as spot (spot) is the 2nd business day after the transaction. Such conditions are quite convenient for contractors (members) of the transaction, as during the current and next business day can be treated with all the necessary documentation and to issue vouchers. The market where currency is exchanged on the current (spot) quotes called spot market (spot market).
It is worth to mention that such a principle after transactions such as spot (spot) is valid only for the major participants in the international currency market. For private investors (retail clients of brokerage houses), working at Forex through the Internet, the deal is done instantly by pressing a mouse button. In such transactions, the value date as such loses its meaning - by the client always reflects the current status of its work at Forex.
For forward (forward) conversion operations are forwards (forwards), futures (futures), options (options) and swaps (swaps). They are also calledderivative financial instruments (derivatives). Such financial instruments have been specifically designed for the real business, because they can reduce the risks of changes in quotations on the international foreign exchange market in the future. For a private investor who wants to earn on Forex through the Internet, such financial instruments are of little value. However, they will be considered for understanding the overall picture of types of conversion operations.
Forwards (forwards) or as they are called - forward contracts entered into between the parties to the transaction on the condition to exchange a certain amount of currency at a pre-specified quotations at a predetermined date (value date). The transaction will be made, regardless of what the current (spot) prices will be in the Forex market on the value date. The amount of the transaction and date about the value quotes can be anything - it all depends on the agreement, which will come counter parties.
Forward contracts on the Forex can be useful, for example, when the Russian company plans to purchase equipment for the US dollars abroad.Imagine that a company today does not have enough funds for an operation, but expects cash flows in rubles to the account during the month. It also expects to exchange rate changes unfavorably to himself aside, that is, It is expected to rise in the dollar. In this case, it makes sense to enter into a forward contract with the bank to buy the required amount of US dollars with a maturity date of one month for favorable quotes for the company. Naturally, the bank can not go to such conditions, if also expect appreciation of the US dollar, and the search contractor for such a transaction can be challenging.
Forward contracts on the one hand to minimize the risks, on the other hand can be a source of lost profits. So, if in the previous example, a month later the US dollar does not go up and fall in price, then the company will be a loss of profit. After all, the company could pay for the equipment fewer rubles.
Futures (futures), in contrast to the forward contracts have a standard maturity (Value) and fixed size amount of currency. This feature allows them to be sold as conventional securities. For futures trading Forex there is a separate market - the futures market (futures market). The average duration of treatment on such futures market - about 3 months.
Options (options) are similar to futures, but weaken the commitment of one of the parties to the transaction. So, if you have to buy futures to perform an operation to agreed conditions of the transaction, in the case of an option, you can opt out of the transaction at your discretion. Forex Options are traded on a separate market - the market of options (options market).
Swaps (swaps) - type of conversion operation, in which the parties enter into a transaction of purchase / sale of a certain amount of currency with the obligation to make a reverse transaction within a certain period of time. For example, the company buys 1 000 US dollars for rubles at current (spot) quotation from the bank with the obligation to sell the bank 1000 dollars for rubles a month for the current (spot) quotations, which will be on forex in a month. Swaps - non-standardized contracts, so in some markets they are not traded.
Of all described conversion operations (financial instruments) for private investors wishing to trade Forex on the Internet, are the most important operations such as spot (spot) on the spot market (spot market). That spot market Forex in detail in the following chapters information porta lforexanewway.
Conversion operations - a deal Forex participants to exchange a specified amount of currency of one country for currency of another country on a certain date at a fixed quote. Conversion operations Forex different value date, ie, delivery date currency relative to the date of the transaction of purchase / sale of foreign currency. On this basis conversion operations can be divided into two categories, as shown below:
operations such as spot (spot) or current conversion operations; forward (forward) conversion operations.
The largest volume of transactions in the Forex hold operations such as spot (spot). It is working on Forex to these transactions is considered on the information portal forexanewway. In international practice, it is assumed that the value date of transactions such as spot (spot) is the 2nd business day after the transaction. Such conditions are quite convenient for contractors (members) of the transaction, as during the current and next business day can be treated with all the necessary documentation and to issue vouchers. The market where currency is exchanged on the current (spot) quotes called spot market (spot market).
It is worth to mention that such a principle after transactions such as spot (spot) is valid only for the major participants in the international currency market. For private investors (retail clients of brokerage houses), working at Forex through the Internet, the deal is done instantly by pressing a mouse button. In such transactions, the value date as such loses its meaning - by the client always reflects the current status of its work at Forex.
For forward (forward) conversion operations are forwards (forwards), futures (futures), options (options) and swaps (swaps). They are also calledderivative financial instruments (derivatives). Such financial instruments have been specifically designed for the real business, because they can reduce the risks of changes in quotations on the international foreign exchange market in the future. For a private investor who wants to earn on Forex through the Internet, such financial instruments are of little value. However, they will be considered for understanding the overall picture of types of conversion operations.
Forwards (forwards) or as they are called - forward contracts entered into between the parties to the transaction on the condition to exchange a certain amount of currency at a pre-specified quotations at a predetermined date (value date). The transaction will be made, regardless of what the current (spot) prices will be in the Forex market on the value date. The amount of the transaction and date about the value quotes can be anything - it all depends on the agreement, which will come counter parties.
Forward contracts on the Forex can be useful, for example, when the Russian company plans to purchase equipment for the US dollars abroad.Imagine that a company today does not have enough funds for an operation, but expects cash flows in rubles to the account during the month. It also expects to exchange rate changes unfavorably to himself aside, that is, It is expected to rise in the dollar. In this case, it makes sense to enter into a forward contract with the bank to buy the required amount of US dollars with a maturity date of one month for favorable quotes for the company. Naturally, the bank can not go to such conditions, if also expect appreciation of the US dollar, and the search contractor for such a transaction can be challenging.
Forward contracts on the one hand to minimize the risks, on the other hand can be a source of lost profits. So, if in the previous example, a month later the US dollar does not go up and fall in price, then the company will be a loss of profit. After all, the company could pay for the equipment fewer rubles.
Futures (futures), in contrast to the forward contracts have a standard maturity (Value) and fixed size amount of currency. This feature allows them to be sold as conventional securities. For futures trading Forex there is a separate market - the futures market (futures market). The average duration of treatment on such futures market - about 3 months.
Options (options) are similar to futures, but weaken the commitment of one of the parties to the transaction. So, if you have to buy futures to perform an operation to agreed conditions of the transaction, in the case of an option, you can opt out of the transaction at your discretion. Forex Options are traded on a separate market - the market of options (options market).
Swaps (swaps) - type of conversion operation, in which the parties enter into a transaction of purchase / sale of a certain amount of currency with the obligation to make a reverse transaction within a certain period of time. For example, the company buys 1 000 US dollars for rubles at current (spot) quotation from the bank with the obligation to sell the bank 1000 dollars for rubles a month for the current (spot) quotations, which will be on forex in a month. Swaps - non-standardized contracts, so in some markets they are not traded.
Of all described conversion operations (financial instruments) for private investors wishing to trade Forex on the Internet, are the most important operations such as spot (spot) on the spot market (spot market). That spot market Forex in detail in the following chapters information porta lforexanewway.
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