Glossary of Forex Trading Terms C - D
- C -
Cable - A term used in the foreign exchange market for the US Dollar/British Pound rate.
Capital Risk - The risk arising from a bank
having to pay to the counter party with out knowing whether the other
party will or is able to meet its side of the bargain. see Herstatt.
Carry - The interest cost of financing securities or other financial instruments held.
Cash Delivery - Same day settlement.
Cash market - The market in the actual financial instrument on which a futures or options contract is based.
Cash - normally refers to an exchange
transaction contracted for settlement on the day the deal is struck.
This term is mainly used in the North American markets and those
countries which rely for foreign exchange services on these markets
because of time zone preference i.e. Latin America. In Europe and Asia,
cash transactions are often referred to as value same day deals.
Cash and Carry - The buying of an asset today
and selling a future contract on the asset. A reverse cash and carry is
possible by selling an asset and buying a future.
Cash Settlement - A procedure for settling
futures contract where the cash difference between the future and the
market price is paid instead of physical delivery.
Central Bank - A nations main regulatory
bank. Traditionally, its primary responsibility is development and
implementation of monetary policy.
Central Rate - Exchange rates against the ECU
adopted for each currency within the EMS.Currencies have limited
movement from the central rate according to the relevant band.
Chartist - An individual who studies graphs
and charts of historic data to find trends and predict trend reversals
which include the observance of certain patterns and characteristics of
the charts to derive resistance levels, head and shoulders patterns,
and double bottom or double top patterns which are thought to indicate
Clean float - An exchange rate that is not materially effected by official intervention.
Closed position - A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
Commission - The fee that a broker may charge clients for dealing on their behalf.
Confirmation - A memorandum to the other party describing all the relevant details of the transaction.
Contract - An agreement to buy or sell a
specified amount of a particular currency or option for a specified
month in the future (See Futures contract).
Conversion Account - A general ledger account
representing the uncovered position in a particular currency. Such
accounts are referred to as Position Accounts.
Conversion - The process by which an asset or
liability denominated in one currency is exchanged for an asset or
liability denominated in another currency.
Conversion arbitrage - A transaction where
the asset is purchased and buys a put option and sells a call option on
the asset purchased, each option having the same exercise price and
Convertible currency - A currency that can be
freely exchanged for another currency (and or gold) without special
authorization from the central bank.
Copey - Slang for the Danish krone.
Correspondent Bank - The foreign banks
representative who regularly performs services for a bank which has no
branch in the relevant centre, e.g. to facilitate the transfer of
funds. In the US this often occurs domestically due to inter state
Counterparty - The other organisation or party with whom the exchange deal is being transacted.
Countervalue - Where a person buys a currency against the dollar it is the dollar value of the transaction.
Country risk - The risk attached to a
borrower by virtue of its location in a particular country. This
involves examination of economic, political and geographical factors.
Various organisations generate country risk tables.
Cover - (1) To take out a forward foreign
exchange contract. (2) To close out a short position by buying currency
or securities which have been sold.
Covered Arbitrage - Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.
Covered Margin - The interest rate margin
between two instruments denominated in different currencies after
taking account of the cost of forward cover.
Crawling peg - A method of exchange rate
adjustment; the rate is fixed/ pegged, but adjusted at certain
intervals in line with certain economic or market indicators.
Credit Risk - Risk of loss that may arise on outstanding contracts should a counter party default on its obligations.
Cross deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.
Cross rates - Rates between two currencies, neither of which is the US Dollar.
Current Account - The net balance of a
country's international payment arising from exports and imports
together with unilateral transfers such as aid and migrant remittances.
It excludes capital flows.
- D -
Day trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.
Deal date - The date on which a transaction is agreed upon.
Deal Ticket - The primary method of recording the basic information relating to a transaction.
Dealer - One who, as opposed to a broker, acts as a principle in all transactions, buying and selling for its own accounts.
Deflator - Difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.
Delivery date - The date of maturity of the
contract, when the exchange of the currencies is made This date is more
commonly known as the value date in the FX or Money markets.
Delivery Risk - A term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.
Depreciation - A fall in the value of a currency due to market forces rather than due to official action.
Desk - Term referring to a group dealing with a specific currency or currencies.
Details - All the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.
Devaluation - Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.
Direct quotation - Quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Dirty Float - Floating a currency when the rate is controlled by intervention by the monetary authorities.