CONTENTS
CHAPTER PAGE NO.
Chapter 1
FOREIGN EXCHANGE …………………………………..
a) Introduction. 3
b) Brief History of Foreign Exchange. 4
c) Forex Rates.
d) Methods of Quoting Exchange Rates. 8
Chapter 2
STRUCTURE OF FOREX MARKETS ………………….
a) Participants in Forex Markets 11
b) How Exchange Brokers Work? 13
Chapter 3
FOREX RISK……………………………………………….
a) Foreign Exchange Exposure 18
b) Types of Forex Risks 19
Chapter 4
HEDGING FOREIGN CURRENCY RISK………………. 27
Chapter 5
HEDGING THROUGH FORWARDS…………………… 29
Chapter 6
HEDGING THROUGH CURRENCY FUTURES………. 35
Chapter 7
HEDGING THROUGH CURRENCY OPTIONS……. 38
Chapter 8
HEDGING THROUGH CURRENCY SWAPS………. 50
Chapter 9
AVOIDING MISTAKES IN FOREX TRADING…….. 54
CONCLUSION………………………………………….. 56
BIBLIOGRAPHY……………………………………….. 57
CHAPTER 1.
FOREIGN EXCHANGE
Introduction to Foreign Exchange
Foreign Exchange is the process of conversion of one currency into another currency. For a country its currency becomes money and legal tender. For a foreign country it becomes the value as a commodity. Since the commodity has a value its relation with the other currency determines the exchange value of one currency with the other. For example, the US dollar in USA is the currency in USA but for India it is just like a commodity, which has a value which varies according to demand and supply.
Foreign exchange is that section of economic activity, which deals with the means, and methods by which rights to wealth expressed in terms of the currency of one country are converted into rights to wealth in terms of the currency of another country. It involves the investigation of the method, which exchanges the currency of one country for that of another. Foreign exchange can also be...
