Trading in the Global Currency Markets

by Luca, Cornelius

• ISBN13: 9780735201460
• ISBN10: 0735201463
• Edition: 2nd
• Format: Hardcover
• Copyright: 2000-07-01
• Publisher: Prentice Hall Press

Summary

(New York Institute of Finance) Text brings the complex machinations of the foreign currency markets to life, clearly and concisely analyzing the various currencies, market forces, and emerging technologies, and illuminating them with real-world examples and graphics. DLC: Foreign exchange market.

Table of Contents

Preface	xiii
Acknowledgments	xvii
What Is Foreign Exchange?	1	(8)
Why Foreign Exchange Occurs	1	(1)
Factors That Have Contributed to Foreign Exchange Volume Growth	2	(7)
Historical Development of Foreign Exchange	9	(14)
A Historical Perspective	9	(2)
The Bretton Woods Accord	11	(5)
Why the Bretton Woods Accord Failed	16	(1)
After Bretton Woods	17	(1)
The Free-Floating Foreign Exchange Markets	18	(3)
An Overview of the Emerging Market Crisis in the 1990s	21	(2)
The European Monetary Union	23	(23)
Historical Background	23	(3)
The European Monetary System	26	(7)
Emergence of the Euro	33	(5)
The European Central Bank (ECB)	38	(6)
Conclusion	44	(2)
Currency Characteristics	46	(16)
The ISO Codes	46	(1)
The U.S. Dollar	47	(1)
The Euro	48	(4)
The Japanese Yen	52	(1)
The British Pound	53	(1)
The Swiss Franc	54	(2)
The Major Foreign Exchange Markets	56	(1)
The Major Players	56	(4)
Conclusion	60	(2)
Foreign Exchange Risks	62	(29)
Exchange Rate Risk	62	(23)
Interest Rate Risk	85	(1)
Credit Risk	86	(3)
Country Risk	89	(1)
Conclusion	90	(1)
Central Banks	91	(13)
The Federal Reserve	91	(2)
The Federal Reserve's Role in Foreign Exchange	93	(7)
An Overview of the Central Banks of the Other G-7 Countries	100	(4)
Price Structure and Foreign Exchange Terminology	104	(9)
Spot Market	104	(1)
Forward Market	105	(1)
Futures Market	105	(1)
Foreign Exchange Terms	106	(5)
Currency Fixings	111	(2)
Corporate Trading	113	(15)
The Role of Foreign Exchange for Corporations	113	(1)
Types of Corporations	114	(1)
Types of Exposure	114	(5)
Hedging	119	(4)
How Foreign Exchange Is Executed	123	(3)
Different Points of View	126	(2)
Foreign Exchange Settlement	128	(21)
The Role of the Back Office	128	(4)
SWIFT	132	(2)
Advisory Bilateral Foreign Exchange Netting Service	134	(1)
ACCORD	135	(2)
CHIPS	137	(2)
Conclusion	139	(1)
Appendix	140	(9)
Conducting Foreign Exchange Trading	149	(15)
The Brokers' Market	149	(7)
Direct Dealing	156	(3)
Dealing Systems	159	(3)
Matching Systems	162	(2)
The Spot Market	164	(15)
The Foreign Currency Spot Marketplace	165	(4)
Profit and Loss	169	(7)
Characteristics of a Spot Trader	176	(1)
Conclusion	177	(2)
The Forward Currency Market	179	(29)
The Forward Foreign Currency Marketplace	179	(1)
General Characteristics of the Forward Market	180	(1)
The Forward Price	181	(2)
Introduction to the Types of Forward Spreads	183	(4)
Methods of Calculating the Forward Outright Prices	187	(1)
The Interest Rate Differential	188	(4)
The Maturity Dates	192	(4)
Currency Forward Outright Deals	196	(2)
Currency Swaps	198	(1)
Trading Currency Swaps	199	(3)
The Rollover or Tom/Next Swap	202	(4)
Covered Interest Rate Arbitrage	206	(2)
Currency Crosses	208	(11)
The Cross Foreign Currency Marketplace	208	(3)
Price Calculation	211	(4)
Relative Strength of a Currency	215	(1)
Trading Components	215	(1)
Position Calculation	215	(1)
Calculation of the Cross Profit and Loss	216	(3)
Currency Futures	219	(17)
The Currency Futures Marketplace	220	(1)
The International Monetary Market	220	(1)
Characteristics of Currency Futures	221	(1)
The Look of Currency Futures	222	(2)
Futures Market and Cash Market: Comparisons	224	(2)
Margins	226	(1)
Contract Size	227	(1)
Floor Trading	227	(1)
Trading Hours	228	(3)
Mark-to-Market	231	(1)
Arbitrage	231	(1)
Exchange for Physical (EFP)	232	(1)
Current Directions in the Futures Markets	233	(1)
Regulation in the United States	234	(1)
Conclusion	235	(1)
Currency Options	236	(35)
The Currency Options Marketplace	236	(1)
Benefits of Trading Options	237	(2)
Where Currency Options Are Traded	239	(9)
Premium	248	(1)
Theoretical Models: Factors Determining Option Price	249	(18)
Option Pricing	267	(4)
Major Option Strategies on Currencies	271	(36)
Basic Strategies	271	(7)
Compound Strategies	278	(11)
Ratio Spreads	289	(5)
Spreads with Both Options and Currency	294	(2)
Exotic Options	296	(8)
Average Options	304	(1)
Conclusion	305	(2)
Economic Fundamentals	307	(36)
Economic Fundamentals	307	(3)
Theories of Exchange Rate Determination	310	(6)
Economic Indicators	316	(6)
Industrial Sector Indicators	322	(4)
Construction Data	326	(1)
Inflation Indicators	327	(5)
Balance of Payments	332	(3)
Employment Indicators	335	(2)
Consumer Spending Indicators	337	(2)
Leading Indicators	339	(2)
Conclusion	341	(2)
Financial and Sociopolitical Factors	343	(8)
The Role of Financial Factors	343	(4)
Political Events	347	(2)
Political Crises	349	(1)
Conclusion	350	(1)
Technical Analysis	351	(33)
The Evolution of Technical Analysis	351	(5)
Types of Charts: A Comparison	356	(8)
Volume and Open Interest	364	(14)
The Importance of the Long-Term Charts	378	(3)
Percentage Retracements	381	(3)
Trend Reversal Patterns	384	(17)
Head-and-Shoulders	384	(4)
Inverse Head-and-Shoulders	388	(1)
Double Top	389	(4)
Double Bottom	393	(1)
Triple Top and Triple Bottom	393	(2)
V-Formations (Spikes)	395	(3)
Other Patterns	398	(3)
Trend Continuation Patterns	401	(15)
Flag Formation	401	(2)
Pennant Formation	403	(2)
Triangle Formation	405	(6)
Wedge Formation	411	(2)
Rectangle Formation	413	(3)
Formations Unique to Bar Charts for Futures	416	(7)
Gaps	416	(5)
Island Reversals	421	(1)
Key Reversal Days	421	(2)
Point-and-Figure Charting	423	(11)
Triple Tops and Bottoms	425	(4)
Support and Resistance Lines	429	(1)
Consolidation Formations	430	(2)
The Horizontal Count	432	(2)
Candlestick Charting	434	(24)
Daily White Candlesticks	435	(1)
Daily Black Candlesticks	436	(2)
Daily Reversal Patterns	438	(3)
Two-Day Candlestick Combinations	441	(17)
Quantitative Trading Methods	458	(7)
Moving Averages	458	(3)
Trading Signals	461	(4)
Oscillators and Studies	465	(14)
Stochastics	465	(2)
Moving Average Convergence-Divergence	467	(2)
Momentum	469	(1)
The Relative Strength Index (RSI)	470	(1)
Other Oscillators	471	(3)
Oscillators Wrap-Up	474	(1)
Studies	474	(5)
W.D. Gann Analysis	479	(4)
The Cardinal Square	479	(2)
The Squaring of Price and Time	481	(1)
Geometric Angles	481	(2)
The Elliott Wave	483	(19)
Basics of Wave Analysis	483	(3)
Impulse Waves-Variations	486	(1)
Diagonal Triangles	487	(3)
Failures (Truncated Fifths)	490	(8)
Fibonacci Analysis	498	(2)
Further Study	500	(1)
Conclusion	500	(2)
Glossary	502	(27)
Appendix A	529	(7)
Appendix B	536	(5)
Bibliography	541	(2)
Index	543