Settlements in International Trade and FX Market

<p>Guaranteed by central banks (A)</p> Signup and view all the answers

<p>To ensure an adequate cash flow for future transactions (D)</p> Signup and view all the answers

<p>To cover potential losses from market fluctuations (D)</p> Signup and view all the answers

<p>NDF contracts are customized, while futures contracts are standardized (B)</p> Signup and view all the answers

<p>Speculating on currency movements (A)</p> Signup and view all the answers

<p>To standardize the rules for banks and customers in documentary collection transactions. (D)</p> Signup and view all the answers

<p>It provides more security for the exporter, as payment is contingent upon the presentation of certain documents. (B)</p> Signup and view all the answers

<p>A presentation where the documents strictly comply with the terms and conditions of the letter of credit. (D)</p> Signup and view all the answers

<p>The importer may damage their reputation with banks and suppliers. (D)</p> Signup and view all the answers

<p>Documentary collections are less secure for the exporter than letters of credit, as the bank guarantees payment to the exporter if the documents meet the requirements. (B)</p> Signup and view all the answers

<p>The issuing bank. (B)</p> Signup and view all the answers

<p>The exporter has complete control over the payment process, similar to a Letter of Credit. (A)</p> Signup and view all the answers

<p>The documents must conform perfectly to the terms and conditions specified in the letter of credit. (A)</p> Signup and view all the answers

<p>Promissory Note and Bill of Exchange (B)</p> Signup and view all the answers

<p>To provide the exporter with information and advice regarding the letter of credit. (A)</p> Signup and view all the answers

<p>Letter of Credit (D)</p> Signup and view all the answers

<p>The importer receives the documents only after making full payment to the bank. (C)</p> Signup and view all the answers

<p>D/A involves the importer accepting a bill of exchange, agreeing to pay later, while D/P requires full immediate payment. (D)</p> Signup and view all the answers

<p>Sales Contract (D)</p> Signup and view all the answers

<p>They have no control over the payment process. (B)</p> Signup and view all the answers

<p>The party that guarantees payment on behalf of the importer. (A)</p> Signup and view all the answers

<p>Improves cash flow by providing faster access to funds. (B)</p> Signup and view all the answers

<p>Risks due to political instability. (C)</p> Signup and view all the answers

<p>Government agencies (D)</p> Signup and view all the answers

<p>FCI (D)</p> Signup and view all the answers

<p>Immediate conversion of receivables into cash. (D)</p> Signup and view all the answers

<p>Factoring fees may include charges for services and risk coverage. (C)</p> Signup and view all the answers

<p>By allowing for better payment terms to encourage sales. (C)</p> Signup and view all the answers

<p>Guaranteed payments from customers. (A)</p> Signup and view all the answers

<p>Open account (A)</p> Signup and view all the answers

<p>Factoring (D)</p> Signup and view all the answers

<p>International factoring (A)</p> Signup and view all the answers

<p>Credit risk (A)</p> Signup and view all the answers

<p>Factoring (C)</p> Signup and view all the answers

<p>One factor in the exporter's country and another in the importer's country (D)</p> Signup and view all the answers

<p>Letter of credit and cash in advance (B)</p> Signup and view all the answers

<p>Derivatives (D)</p> Signup and view all the answers

<p>It can be amended or canceled at any time by the issuing bank. (D)</p> Signup and view all the answers

<p>Irrevocable L/C (A)</p> Signup and view all the answers

<p>It guarantees payment if the required documents are presented correctly. (B)</p> Signup and view all the answers

<p>Funds may be tied up before shipment occurs. (B)</p> Signup and view all the answers

<p>Only the issuing bank guarantees payment, leaving the advising bank without risk. (B)</p> Signup and view all the answers

<p>All letters of credit are deemed irrevocable by default. (C)</p> Signup and view all the answers

<p>Around 70% of first-time presentations were rejected by banks. (B)</p> Signup and view all the answers

<p>They are time-consuming due to careful verification of documents. (B)</p> Signup and view all the answers

A banking operation where payment is collected through banks for exported goods.

Documents Against Payment: buyer gets documents only after full payment.

Documents Against Acceptance: buyer gets documents after accepting a bill to pay later.

Exporters receive payment assurance as documents stay with banks until payment.

Importers verify shipment before payment and control payment timing.

Risk of non-payment if importer refuses documents or delays due to errors.

Importers can't check goods before payment causing potential issues.

Different methods such as open account, letter of credit, and advance payment.

A payment term where goods are shipped before payment is received.

A document from a bank guaranteeing a buyer's payment to a seller.

Payment is made before the goods are shipped.

A financial transaction where a business sells its receivables to a factor for immediate cash.

Factoring that involves receivables from sales within the same country.

Factoring that deals with receivables from export sales across borders.

Involves one factor managing financing either in the exporter's or importer's country.

An organization founded in 1968 that merged with IFG in 2016, headquartered in Amsterdam with 400 members worldwide.

A financing method where exporters receive cash advances against their receivables from customers.

A financing approach where factors manage receivables for importers, helping with cash flow.

Advantages include higher sales, protection from bad debts, better cash flow, and reduced administrative tasks.

Drawbacks include higher costs, political risk not covered, and restrictions on certain countries.

Banks that provide factoring services directly, contributing to exporters' cash flow.

Non-bank entities that specialize exclusively in offering factoring services.

Uniform Rules for Collection, standardized rules by ICC to facilitate documentary collection.

Obligation by a bank to pay exporter upon fulfillment of L/C terms.

Parties involved include importer, issuing bank, exporter, and advising bank.

Documents must strictly conform to L/C terms for valid presentation.

Presentation of documents according to the terms of the credit.

Documents needed include signed invoices, bills of lading, certificates of origin, etc.

A document from a bank guaranteeing payment to the exporter once conditions are met.

The bank that acts on behalf of the importer and issues the L/C.

A contract that settles cash difference between forward and reference rates without actual currency delivery.

The agreed exchange rate in an NDF contract for future transactions, regardless of actual rates.

The market rate against which the NDF forward rate is compared upon settlement.

The total amount in currency used to calculate cash settlements in NDF contracts.

Simultaneous buying and selling of currency for two different dates, often to manage liquidity.

Standardized contracts traded on exchanges to buy or sell currency at a fixed price in the future.

The deposit required to open and maintain a position in currency futures, adjusted daily for profits/losses.

Entities that guarantee transactions in currency futures, reducing default risk.

A letter of credit that can be amended or canceled by the issuing bank anytime.

A letter of credit that cannot be changed or canceled without consent from both parties involved.

A letter of credit where only the issuing bank guarantees payment, no additional risk taken by the advising bank.

A letter of credit where the advising bank adds its guarantee, thus sharing responsibility for payment.

Payment is made immediately once the required documents are presented.

Payment is made at a later date as agreed in the contract, not immediately.

Uniform Customs and Practice for Documentary Credits, a set of rules for letter of credit transactions introduced in 2007.

A supplement to UCP 600 for electronic document presentation, facilitating modern transactions.