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Friday, August 29, 2008
FOREX GLOSSARY
ICCH
International Commodities Clearing House Limited, a clearing house based in London operating world wide for many futures markets.
IFEMA
International Foreign Exchange Master Agreement
IMF - International Monetary Fund
The IMF is an international organization of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment
IMM
International Monetary Market, part of the Chicago Mercantile Exchange that lists a number of currency and financial futures' implied volatility. A measurement of the market's expected price range of the underlying currency futures based on the traded-option premiums.
Implied Rates
The interest rate determined by calculating the difference between spot and forward rates.
In-the-money
An option contract that has intrinsic value.
Inconvertible Currency
Currency which cannot be exchanged for other currencies, either because this is forbidden by the foreign exchange regulations
Index Linking
The process of linking wages, social benefits payments, prices, interest rates or loan values to an economic index, usually of prices.
Indicative quote
A market-maker's price which is not firm.
Inflation
An economic condition where there is an increase in the price of consumer goods, thereby eroding purchasing power.
Initial Margin
The initial deposit of collateral required to enter into a position as a guarantee on future performance
Initial Margin Requirement
The minimum portion of a new security purchase that an investor must pay for in cash.
Interbank Market
The interbank market is the over-the-counter market of dealers that make markets in foreign exchange to one another.
Interbank Rates
The Foreign Exchange rates at which large international banks quote other large international banks
Inter-dealer Broker
A specialist broker who acts as an intermediary between market-makers who wish to buy or sell securities to improve their book positions, without revealing their identities to other market-makers.
Interest Arbitrage
Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case, some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.
Interest Parity
One currency is in interest parity with another when the difference in the interest rates is equalised by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese Yen against sterling would bring about interest parity
Interest Rate Cap
An agreement that provides the buyer of a cap with a maximum interest rate for future borrowing requirements.
Interest Rate Collar
A combination of a cap and a floor to provide maximum and minimum interest rates for borrowing or lending.
Interest Rate Floor
An agreement which provides the buyer of the floor with a minimum interest rate for future lending requirements.
Interest Rate Option
An agreement permitting a party to obtain a particular interest rate, issued both OTC and by exchanges.
Interest Rate Swaps
An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows, whether payments or receipts are exchanged.
Intervention
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Intraday Limit
Limit set by bank management on the size of each dealer's Intra Day Position.
Intra Day Position
Open positions run by a client Usually squared within the day by the close.
Intrinsic Value
The difference between the strike price and the underlying fx spot contract rate (American Style Options) or the fx forward rate (European Style Options). The intrinsic value represents the actual value of the option if exercised. Please note that the intrinsic value must be zero (0) or above - if an option has no intrinsic value, then the option is simply referred to as having no (or zero) intrinsic value (the intrinsic value is never represented as a negative number).
Inverted Market
Where short term instruments are trading at premiums to long term instruments.
Introducing Broker
A person or legal entity that introduces customers to forex company often in return for compensation in terms of a fee per transaction .introducing broker are prevented from accepting margined funds from their clients.
IRS - Interest Rate Swaps
An exchange of two debt obligations that have different payment streams. The transaction usually exchanges two parallel loans; one fixed the other floating.
International Commodities Clearing House Limited, a clearing house based in London operating world wide for many futures markets.
IFEMA
International Foreign Exchange Master Agreement
IMF - International Monetary Fund
The IMF is an international organization of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment
IMM
International Monetary Market, part of the Chicago Mercantile Exchange that lists a number of currency and financial futures' implied volatility. A measurement of the market's expected price range of the underlying currency futures based on the traded-option premiums.
Implied Rates
The interest rate determined by calculating the difference between spot and forward rates.
In-the-money
An option contract that has intrinsic value.
Inconvertible Currency
Currency which cannot be exchanged for other currencies, either because this is forbidden by the foreign exchange regulations
Index Linking
The process of linking wages, social benefits payments, prices, interest rates or loan values to an economic index, usually of prices.
Indicative quote
A market-maker's price which is not firm.
Inflation
An economic condition where there is an increase in the price of consumer goods, thereby eroding purchasing power.
Initial Margin
The initial deposit of collateral required to enter into a position as a guarantee on future performance
Initial Margin Requirement
The minimum portion of a new security purchase that an investor must pay for in cash.
Interbank Market
The interbank market is the over-the-counter market of dealers that make markets in foreign exchange to one another.
Interbank Rates
The Foreign Exchange rates at which large international banks quote other large international banks
Inter-dealer Broker
A specialist broker who acts as an intermediary between market-makers who wish to buy or sell securities to improve their book positions, without revealing their identities to other market-makers.
Interest Arbitrage
Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case, some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.
Interest Parity
One currency is in interest parity with another when the difference in the interest rates is equalised by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese Yen against sterling would bring about interest parity
Interest Rate Cap
An agreement that provides the buyer of a cap with a maximum interest rate for future borrowing requirements.
Interest Rate Collar
A combination of a cap and a floor to provide maximum and minimum interest rates for borrowing or lending.
Interest Rate Floor
An agreement which provides the buyer of the floor with a minimum interest rate for future lending requirements.
Interest Rate Option
An agreement permitting a party to obtain a particular interest rate, issued both OTC and by exchanges.
Interest Rate Swaps
An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows, whether payments or receipts are exchanged.
Intervention
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Intraday Limit
Limit set by bank management on the size of each dealer's Intra Day Position.
Intra Day Position
Open positions run by a client Usually squared within the day by the close.
Intrinsic Value
The difference between the strike price and the underlying fx spot contract rate (American Style Options) or the fx forward rate (European Style Options). The intrinsic value represents the actual value of the option if exercised. Please note that the intrinsic value must be zero (0) or above - if an option has no intrinsic value, then the option is simply referred to as having no (or zero) intrinsic value (the intrinsic value is never represented as a negative number).
Inverted Market
Where short term instruments are trading at premiums to long term instruments.
Introducing Broker
A person or legal entity that introduces customers to forex company often in return for compensation in terms of a fee per transaction .introducing broker are prevented from accepting margined funds from their clients.
IRS - Interest Rate Swaps
An exchange of two debt obligations that have different payment streams. The transaction usually exchanges two parallel loans; one fixed the other floating.
Labels: Forex Glossary
