12 Questions
What is the main reason for London being the center of global foreign exchange trading?
Network of dealer banks actively involved in foreign exchange trading
What percentage of the global trading in foreign exchange was conducted by JPMorgan in 2018?
12 percent
What is one of the reasons why there are so few foreign exchange traders?
Capital intensity of the business
What kind of personality traits are desirable for a foreign exchange trader?
Loves pressures, makes quick decisions, and can take losses
What is the primary reason for people to engage in the foreign exchange market?
To trade goods and services
What happens when a nation's export of goods and services increases?
There is a demand for foreign currency and a supply of the nation's currency
How does importing goods and services affect the home currency in the foreign exchange market?
Causes the home currency to be sold in order to buy foreign currency
What determines whether U.S. exports to Britain generate a supply of pounds and a demand for dollars?
The preference of U.S. exporters to end up holding U.S. dollars
What is the process called when an opportunity to make a riskless profit is exploited using three different exchange rates?
Triangular arbitrage
If the exchange rate for the pound in terms of dollars is $1.60, and the exchange rate for the Swiss franc in terms of dollars is $0.50, how many francs can be bought with $150?
300 francs
What tends to happen to the dollar–franc exchange rate as a result of the extra demand for francs due to triangular arbitrage?
Increase
What is the main outcome of the pressures placed on the exchange rates due to triangular arbitrage?
Bring the exchange rates into line with each other
Test your knowledge about the global foreign exchange trading and the role of London as the center of foreign exchange. Learn about the key financial institutions involved in foreign exchange trading.
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