Posts
Friday, August 29, 2008
FOREX GLOSSARY
M1
Cash in circulation plus demand deposits at commercial banks. There are variations between the precise definitions used by national financial authorities.
M2
Includes demand deposits time deposits and money market mutual funds excluding large CDs
M3
In the UK it is M1 plus public and private sector time deposits and sight deposits held by the public sector.
M4
In the US it is M2 plus negotiable CDs.
Maintenance Margin
The minimum margin, which an investor must keep at forex company to maintain an open position
Managed Float
When the monetary authorities intervene regularly in the market to stabilize the rates or to aim the exchange rate in a required direction.
Margin
The required equity that an investor must deposit to collateralize a position
Margin Account
An account that allows leverage buying on credit and borrowing on currencies already in the account. Buying on credit and borrowing are subject to standards established by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding.
Margin Call
A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse exchange rate movements
Marginal Risk
The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract
Market Amount
The minimum amount conventionally dealt for between banks.
Mark to Market
The daily adjustment of an account to reflect unrealized profits and losses.
Market Maker
A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
Market Order
An order to buy/sell at the best price available when the order reaches the market.
Market Close
This refers to the time of day that a market closes. In the 24 hour-a-day foreign exchange market, there is no official market close. 5:00 PM EST is often referred to and understood as the market close because value dates for spot transactions change to the next new value date at that time.
Market Rate
The current quote of a currency pair.
Market Risk
The risks that occur when general market pressures cause the value of an investment to fluctuate.
Marry
Where a dealer is able to match two customer deals which off set one another.
Marshall – Lerner
A model that states that if the sum of the elasticity's of demand for a country's and that of the imports exceed one, then devaluation will have a positive effect upon the trade balance.
Matched Book
If the distribution of the maturities of a banks liabilities equal that of its assets , it is said to be running a matchedbook.
Matching
The process of ensuring that purchases and sales in each currency and deposits given and taken in each currency are in balance, by amount and maturity.
Matching System
Electronic Systems duplicating the traditional brokers market. A price shown by a bank is available to all trades.
Maturity Date
The date on which payment of a financial obligation is due.
Mid-price or Middle Rate
The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.
Minimum price fluctuation
The smallest increment of market price movement possible in a given futures contract.
Minimum Reserve
Reserves required to be deposited at central banks by commercial banks and other financial institutions. Sometimes referred to as Registered Reserves
Mismatch
(1) A mismatch between the interest rate maturities of a banks assets and liabilities.
(2) Forward purchases differ in the value date from the forward sales in a given currency.
MITI
Japanese ministry of International Trade & Industry.
Momentum
The tendency of a currency pair to continue movement in a single direction.
Money Markets/MM
Refers to investments that are short-term (i.e. under one year) and whose participants include banks and other financial institutions. Examples include Deposits, Certificates of Deposit, Repurchase Agreements, Overnight Index Swaps and Commercial Paper. Short-term investments are safe and highly liquid.
Money Market Operations
Comprises the acceptance and re-lending of deposits on the money market
Money Supply
The amount of money in the economy, which can be measured in a number of ways. See definitions of M0-M4.
Monetarism
A school of economics which believes that strict control of money supply is the principal tool for implementing monetary policy, especially against inflation. Policies include cuts in public spending and high interest rates.
Monetary Base
Currency in circulation plus banks' required and excess deposits at the central bank
Monetary Easing
A modest loosening of monetary constraint by changing interest rate, money supply, deposit ratios.
Money Supply
Money supply figures, and M1 specifically, once were the most important release to watch in the Treasury market, as the Fed directly targeted M1 growth in the early 1980s. The focus on money supply has long since been abandoned, however. To the extent that money supply is still monitored by the market, M2 is the favored monetary aggregate. The Fed still targets both M2 and M3 in a rhetorical sense, but these targets mean little when it comes to policy decisions. If the Fed misses its target, it is more likely to change the target than it is to change policy. In 2000, the Fed finally abandoned the targets altogether, thereby removing any remaining emphasis on this one-time star release.
MPC - Monetary Policy Committee
A committee of the central bank that is responsible for the monetary policy decisions.
Monetary Union
An agreement between countries to maintain a fixed exchange rate between their currencies. A process which the EMS is intended to lead to, especially after the Maastricht Treaty.
Most Favored Nation (MFN)
An undertaking to give the rate of tariff concession offered to members of the GATT. More concessionaire rates can exist
Moving Average
A way of smoothing a set of price/rate data by taking the average price of data range of values.
Cash in circulation plus demand deposits at commercial banks. There are variations between the precise definitions used by national financial authorities.
M2
Includes demand deposits time deposits and money market mutual funds excluding large CDs
M3
In the UK it is M1 plus public and private sector time deposits and sight deposits held by the public sector.
M4
In the US it is M2 plus negotiable CDs.
Maintenance Margin
The minimum margin, which an investor must keep at forex company to maintain an open position
Managed Float
When the monetary authorities intervene regularly in the market to stabilize the rates or to aim the exchange rate in a required direction.
Margin
The required equity that an investor must deposit to collateralize a position
Margin Account
An account that allows leverage buying on credit and borrowing on currencies already in the account. Buying on credit and borrowing are subject to standards established by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding.
Margin Call
A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse exchange rate movements
Marginal Risk
The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract
Market Amount
The minimum amount conventionally dealt for between banks.
Mark to Market
The daily adjustment of an account to reflect unrealized profits and losses.
Market Maker
A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
Market Order
An order to buy/sell at the best price available when the order reaches the market.
Market Close
This refers to the time of day that a market closes. In the 24 hour-a-day foreign exchange market, there is no official market close. 5:00 PM EST is often referred to and understood as the market close because value dates for spot transactions change to the next new value date at that time.
Market Rate
The current quote of a currency pair.
Market Risk
The risks that occur when general market pressures cause the value of an investment to fluctuate.
Marry
Where a dealer is able to match two customer deals which off set one another.
Marshall – Lerner
A model that states that if the sum of the elasticity's of demand for a country's and that of the imports exceed one, then devaluation will have a positive effect upon the trade balance.
Matched Book
If the distribution of the maturities of a banks liabilities equal that of its assets , it is said to be running a matchedbook.
Matching
The process of ensuring that purchases and sales in each currency and deposits given and taken in each currency are in balance, by amount and maturity.
Matching System
Electronic Systems duplicating the traditional brokers market. A price shown by a bank is available to all trades.
Maturity Date
The date on which payment of a financial obligation is due.
Mid-price or Middle Rate
The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.
Minimum price fluctuation
The smallest increment of market price movement possible in a given futures contract.
Minimum Reserve
Reserves required to be deposited at central banks by commercial banks and other financial institutions. Sometimes referred to as Registered Reserves
Mismatch
(1) A mismatch between the interest rate maturities of a banks assets and liabilities.
(2) Forward purchases differ in the value date from the forward sales in a given currency.
MITI
Japanese ministry of International Trade & Industry.
Momentum
The tendency of a currency pair to continue movement in a single direction.
Money Markets/MM
Refers to investments that are short-term (i.e. under one year) and whose participants include banks and other financial institutions. Examples include Deposits, Certificates of Deposit, Repurchase Agreements, Overnight Index Swaps and Commercial Paper. Short-term investments are safe and highly liquid.
Money Market Operations
Comprises the acceptance and re-lending of deposits on the money market
Money Supply
The amount of money in the economy, which can be measured in a number of ways. See definitions of M0-M4.
Monetarism
A school of economics which believes that strict control of money supply is the principal tool for implementing monetary policy, especially against inflation. Policies include cuts in public spending and high interest rates.
Monetary Base
Currency in circulation plus banks' required and excess deposits at the central bank
Monetary Easing
A modest loosening of monetary constraint by changing interest rate, money supply, deposit ratios.
Money Supply
Money supply figures, and M1 specifically, once were the most important release to watch in the Treasury market, as the Fed directly targeted M1 growth in the early 1980s. The focus on money supply has long since been abandoned, however. To the extent that money supply is still monitored by the market, M2 is the favored monetary aggregate. The Fed still targets both M2 and M3 in a rhetorical sense, but these targets mean little when it comes to policy decisions. If the Fed misses its target, it is more likely to change the target than it is to change policy. In 2000, the Fed finally abandoned the targets altogether, thereby removing any remaining emphasis on this one-time star release.
MPC - Monetary Policy Committee
A committee of the central bank that is responsible for the monetary policy decisions.
Monetary Union
An agreement between countries to maintain a fixed exchange rate between their currencies. A process which the EMS is intended to lead to, especially after the Maastricht Treaty.
Most Favored Nation (MFN)
An undertaking to give the rate of tariff concession offered to members of the GATT. More concessionaire rates can exist
Moving Average
A way of smoothing a set of price/rate data by taking the average price of data range of values.
Labels: Forex Glossary
