Podcast
Questions and Answers
Which of the following is NOT a factor that affects portfolio performance in the foreign exchange market?
Which of the following is NOT a factor that affects portfolio performance in the foreign exchange market?
- Foreign competition
- Exchange rate
- Domestic operations (correct)
- Demand from foreign investors
What is the purpose of FX instruments?
What is the purpose of FX instruments?
- To speculate on future FX movements
- To reduce risk (correct)
- To generate profit
- To facilitate international trade
Which type of transaction accounts for the majority of daily turnover in the global FX market?
Which type of transaction accounts for the majority of daily turnover in the global FX market?
- Outright forward contracts (correct)
- FX options
- FX swaps
- Spot transactions
What is the settlement period for most spot transactions?
What is the settlement period for most spot transactions?
Which market has the largest daily turnover based on the information provided?
Which market has the largest daily turnover based on the information provided?
What makes the foreign exchange market a key market for investors and market participants to understand?
What makes the foreign exchange market a key market for investors and market participants to understand?
What would be impossible without the trade in currencies facilitated by the foreign exchange market?
What would be impossible without the trade in currencies facilitated by the foreign exchange market?
Why does investment portfolio performance increasingly reflect global determinants?
Why does investment portfolio performance increasingly reflect global determinants?
Which type of exchange rate transaction occurs with currency settlement longer than the usual T + 2 settlement for spot delivery?
Which type of exchange rate transaction occurs with currency settlement longer than the usual T + 2 settlement for spot delivery?
What are the two specifications required for a forward contract?
What are the two specifications required for a forward contract?
What is the main difference between futures contracts and OTC forward contracts?
What is the main difference between futures contracts and OTC forward contracts?
What is the combination of an offsetting spot transaction and a new forward contract referred to as?
What is the combination of an offsetting spot transaction and a new forward contract referred to as?
Which of the following statements about FX swaps is true?
Which of the following statements about FX swaps is true?
What is the cash flow on day 95 for the trader in the given scenario?
What is the cash flow on day 95 for the trader in the given scenario?
In an FX swap, what happens to the forward position?
In an FX swap, what happens to the forward position?
What are FX options used for?
What are FX options used for?
According to the text, what is the condition that guarantees that devaluations improve the trade balance?
According to the text, what is the condition that guarantees that devaluations improve the trade balance?
What does a demand elasticity of 0.6 mean?
What does a demand elasticity of 0.6 mean?
What is the equation for the change in expenditure (%ΔR) in terms of price change (%ΔP) and demand elasticity (ε)?
What is the equation for the change in expenditure (%ΔR) in terms of price change (%ΔP) and demand elasticity (ε)?
What does it mean if demand is described as 'elastic'?
What does it mean if demand is described as 'elastic'?
According to the Marshall-Lerner condition, when is it more likely that the trade balance will improve?
According to the Marshall-Lerner condition, when is it more likely that the trade balance will improve?
What is the classic Marshall-Lerner condition when trade is initially balanced?
What is the classic Marshall-Lerner condition when trade is initially balanced?
What is the formula for the Marshall-Lerner equation?
What is the formula for the Marshall-Lerner equation?
What is the J-curve effect?
What is the J-curve effect?
Which of the following is true about the absorption approach to the trade balance?
Which of the following is true about the absorption approach to the trade balance?
What is the main mechanism by which depreciation of the currency reduces domestic expenditure relative to income?
What is the main mechanism by which depreciation of the currency reduces domestic expenditure relative to income?
When can a devaluation/depreciation of the domestic currency improve the trade balance?
When can a devaluation/depreciation of the domestic currency improve the trade balance?
What happens to the trade balance if the economy is at full employment and domestic expenditure does not decline after a currency depreciation?
What happens to the trade balance if the economy is at full employment and domestic expenditure does not decline after a currency depreciation?
What is the equation for the trade balance according to the absorption approach?
What is the equation for the trade balance according to the absorption approach?
How does a devaluation/depreciation of the domestic currency affect income relative to expenditure?
How does a devaluation/depreciation of the domestic currency affect income relative to expenditure?
According to the text, the trade balance is equal to the country's saving minus its investment in new plants and equipment. Equivalently, it is equal to the difference between income (GDP) and domestic expenditure, or absorption.
According to the text, the trade balance is equal to the country's saving minus its investment in new plants and equipment. Equivalently, it is equal to the difference between income (GDP) and domestic expenditure, or absorption.
According to the text, how can a devaluation/depreciation of the domestic currency improve the trade balance?
According to the text, how can a devaluation/depreciation of the domestic currency improve the trade balance?
According to the text, what happens to the trade balance when there is excess capacity in the economy?
According to the text, what happens to the trade balance when there is excess capacity in the economy?
According to the text, in what situation can the trade balance not improve unless domestic expenditure declines?
According to the text, in what situation can the trade balance not improve unless domestic expenditure declines?
According to the text, what is the main mechanism through which depreciation of the currency reduces domestic expenditure relative to income?
According to the text, what is the main mechanism through which depreciation of the currency reduces domestic expenditure relative to income?
According to the text, what happens to the trade balance when the stimulative effect of the exchange rate change is negated by the higher price level?
According to the text, what happens to the trade balance when the stimulative effect of the exchange rate change is negated by the higher price level?
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