FOREIGN EXCHANGE MARKET

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PRESENTED BY SRAVAN.P(1225110155) SUDHEER KUMAR(1225110156) SUNITHA.K(1225110157)

CONTENTS::

CONTENTS: MEANING FEATURES CHARACTERISTICS FUNCTIONS PARTICIPANTS IN THE MARKET ADVANTAGES CONCLUSION

FOREIGN EXCHANGE MARKET:

FOREIGN EXCHANGE MARKET MEANING: It is the mechanism for exchanging one currency for another. A means to reduce exposure to the risk to fluctuating exchange rates. It is by far the largest market in the world, interms of cash value traded &includes trading b/w large banks, central banks, currency speculators, multinational corporations, govt and other financial markets & institutions.

The foreign exchange market is unique because of::

The foreign exchange market is unique because of: Its trading volume. The extreme liquidity of the market. The large number of &variety of, traders in the market. Its geographical dispersion. Its long trading hours-24hrs a day(except on weekends) The variety of factors that affects exchange rate.

Characteristics: :

Characteristics: The world wide volume of foreign exchange trading is enormous & it has ballooned in recent years. New technologies, such as internet links are used among the major foreign exchange trading centers(London, New York, Tokyo, Frank furt & Singapore) The integration of financial centers implies that there can be no significant arbitrage. -the process of buying currency at cheap and sell it high price.

Geographical extent of the foreign exchange market::

Geographical extent of the foreign exchange market: Global currency trading is a 24hrs-a-day process. Many large international banks operate trading rooms in major trading center on around-the-clock basis. Some currency trading is conducted on an official trading floor by open bidding but most of it is done through dealers.

Functions of Foreign exchange market::

Functions of Foreign exchange market: Transfer of purchasing power. Financing of Inventory in transit. Hedging facilities. Currency conversions. Reducing foreign exchange risks: the risk exist that the exchange values of national currency may fluctuate i.e. Transaction exposure

PARTICIPANTS IN THE MARKET::

PARTICIPANTS IN THE MARKET: A. Participants at 2 Levels: 1.Wholesale Level (95%)- - major banks 2.Retail Level- - business customers. B. Two Types of Currency Markets: 1.Spot Market: - immediate transaction - recorded by 2 nd business day 2.Forward Market: - transactions take place at a specified future date

Contd…..:

Contd ….. C. Participants by Market: 1. Spot Market a. commercial banks b. brokers c. customers of commercial and central banks 2.Forward Market a. arbitrageurs b. traders c. hedgers d. speculators

Model of foreign exchange market:

Model of foreign exchange market

CONCLUSION :

CONCLUSION

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