| Definitions : | | | | A market dominated by risky futures |
| The exchange is the act by which we exchange the | | | | transactions Foreign exchange risk is the risk of |
| currencies of different nations. Currencies take the | | | | capital loss associated with future changes in the |
| same form as the currency within a country. Most of | | | | exchange rate. Since the seventies, this risk has |
| the assets traded currency in foreign exchange | | | | increased with the widespread floating currencies |
| markets are deposits in banks. The rate of change is | | | | and the development of international commercial and |
| the price of the currency of a country in terms of | | | | financial transactions. The existence of exchange |
| the currency of another. | | | | rate fluctuations has two different types of attitudes |
| There are two types of exchange rates, according | | | | on the part of speakers on the market: some |
| to the date of exchange of real currency: the | | | | groups do not want to bet on what will be the |
| exchange rate Cash is the price for a transaction | | | | rate change in the future. They are exposed to |
| "immediate" (one or two days maximum for large | | | | currency risk in the course of their ordinary activities |
| transactions), the exchange rate is the price for a | | | | and seek to cover their positions creditor or debtor. |
| transaction that will occur at a at some time in the | | | | Other groups believe they can take a position |
| future, in 30, 90 or 180 days. Transactions in cash | | | | exposed to currency risk to realize a gain. There was |
| only that 40% of transactions. The foreign | | | | speculation then the future foreign exchange |
| exchange market is clearly a forward market. | | | | transactions through arbitration. In reality, the |
| An exchange rate can be expressed in two ways: | | | | operations cambiaire mix to varying degrees |
| The listing on the "some" is to give the number of | | | | coverage and speculation and the same individuals |
| foreign monetary units equivalent to a unit of local | | | | may adoptthese two attitudes. |
| currency rating to " uncertainty indicates the number | | | | The forward contract is the main way to hedge or |
| of local currency units for one unit of | | | | speculate on the market changes. This explains why |
| currency foreign. For example, 20 January 1999, the | | | | it dominates the contract of exchange spot: in 1998 |
| euro price was U.S. $ 1.1571 in Paris (to quote some), | | | | 63% of operations of foreign exchange markets are |
| or yet the dollar against euro was at 0.86472 (listing | | | | forward transactions and 37% of operations cash. A |
| to uncertainty). When the euro appreciates against | | | | forward contract is an agreement to exchange one |
| other currencies, the value quoted in certain amounts, | | | | currency against another a future date at a price |
| but its market value to uncertainty decreases. | | | | fixed today, the exchange rate. There are different |
| Presentations subsequent tables and graphs focus on | | | | contracts exchange term contracts based on the |
| the exchange listing to uncertainty. | | | | traditional term bank and swap broker, are most |
| Key Features : | | | | prevalent (57% of the operations of foreign |
| A market dominated by a few network financial In | | | | exchange markets in 1998), those based on other |
| contrast to stock markets, which have a specific | | | | derivatives, futures and currency options are still |
| geographical location, the market forchanges knows | | | | marginal (6% of operations 1998). |
| no borders: there is one foreign exchange market in | | | | A market dominated by banks |
| the world. The Currency transactions are also well | | | | Three groups of agents operate in the foreign |
| and simultaneously in Paris, Tokyo, London or New | | | | exchange market: the first group is the companies, |
| York. Of by its global nature, the foreign exchange | | | | fund managers and individuals, the second meets the |
| market is an economic organization without proper | | | | monetary authorities (central banks), the third group |
| regulation, it is self-organized by public and private | | | | consists of banks and brokers that provide daily |
| that interviennent. The foreign exchange market is | | | | functioning of the market. The first group of agents |
| geographically concentrated on the financial markets | | | | do not act directly but transmit orders to the banks |
| of some country. In 1998, the UK represents 32% | | | | so-called "customer" for the purchase or sale of |
| of operations, the United States 18%, Japan | | | | currencies. This is the retail market (transactions |
| 8%,Germany 5% and France 4%. | | | | between banks and their clients) The monetary |
| A market dominated by a few coins Transactions in | | | | authorities intervene on the market to regulate the |
| foreign exchange markets are concentrated on a | | | | course (purchase and sale of foreign currency) and |
| small number of currencies, and overwhelmingly on | | | | possibly regulate exchange transactions (foreign |
| the dollar. In 1998, the U.S. dollar on average in 87% | | | | exchange). Foreign exchange banks and brokers are |
| of identified transactions, or side or the demand side. | | | | the only private parties to operate directly on the |
| Zone currencies euro appear in 52% of transactions | | | | market. For this reason, the foreign exchange market |
| (30% for the 5% mark and the franc french), the | | | | is primarily a wholesale interbank market. In 1998, |
| yen Japanese and the British pound are down, they | | | | nearly 90% of transactions are cambiaire made |
| are involved respectively in 21% and in 11% of | | | | between banks and other financial intermediaries. |
| transactions. | | | | |