International Trade & Foreign Exchange


International Trade & Foreign Exchange (FE)


International Trade & Foreign Exchange (FE)



List of Short notes:



What is Interest Rate Arbitrage?

Interest rates vary between countries based on their current economic cycle, which creates an opportunity for international investors. By purchasing a foreign currency with a domestic currency, investors can profit from the difference in interest rates between two countries. While these bets are no longer as popular as they used to be, they are still widely used in the financial markets.
In this article, we will take a closer look at interest rate arbitrage and the strategies that international investors use to profit from it.


What is Back-To-Back Letters Of Credit?

The back-to-back LC is actually made up of two distinct LCs, one issued by the buyer's bank to the intermediary and the other issued by the intermediary's bank to the seller. With the original LC from the buyer's bank in place, the broker goes to his own bank and has a second LC issued, with the seller as beneficiary.

What is Bill Of Lading?

A bill of lading is a document issued by a carrier to acknowledge receipt of cargo for shipment. In British English the term relates to ship transport only, and in American English to any type of transportation of goods.


What is Asian Clearing Union (ACU)?

Asian Clearing Union (ACU) is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis. The main objectives of the clearing union are to facilitate payments among member countries for eligible transactions, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade and banking relations among the participating countries.


What is a Cross Rate?

A cross rate is the currency exchange rate between two currencies when neither are official currencies of the country in which the exchange rate quote is given. Foreign exchange traders use the term to refer to currency quotes that do not involve the U.S. dollar, regardless of what country the quote is provided in.
Foreign exchange rates of major world currencies. Compare key cross rates and currency exchange rates of U.S. Dollars, Euros, British Pounds, and others.
The cross rate is the exchange rate between currency A and currency C derived from actual exchange rate between currency A and currency B and between currency B and currency C. Sometimes cross rate is referred to an exchange rate between two currencies not involving the US dollar. Currency vendor provides quotes for only the most liquid currencies such as the US dollar, Euro, Pound Sterling, Swiss Franc, etc. Exchange rates between other currencies is normally calculated as the cross rates using the quotes for major currencies.



What is Financial Derivatives? A derivative is a financial contract that derives its value from an underlying asset. The buyer agrees to purchase the asset on a specific date at a specific price. Derivatives are often used for commodities, such as oil, gasoline or gold. Another asset class is currencies, often the U.S. dollar. Derivatives are securities which are linked to other securities, such as stocks or bonds. Their value is based off of the primary security they are linked to, and they are therefore not worth anything in and of themselves.There are literally thousands of different types of financial derivatives. However, most investment and financial engineering strategies revolve around the following three:

Options:
Options are contracts between two parties to buy or sell a security at a given price. They are most often used to trade stock options, but may be used for other investments as well. If an investor purchases the right to buy an asset at a particular price within a given time frame, he has purchased a call option. Conversely, if he purchases the right to sell an asset at a given price, he has purchased a put option.
Futures:
Futures work on the same premise as options, although the underlying security is different. Futures were traditionally used for purchasing the rights to buy or sell a commodity, but they are also used to purchase financial securities as well. It is possible to purchase an S&P 500 index future, or a future associated with a particular interest rate.

Swaps:
Swaps give investors the opportunity to exchange the benefits of their securities with each other. For example, one party may have a bond with a fixed interest rate, but is in a line of business where they have reason to prefer a varying interest rate. They may enter into a swap contract with another party in order to exchange interest rates.


European Common Market i.e. EU Common Market

European Common Market synonyms, European Common Market pronunciation, European Common Market translation, English dictionary definition of European Common Market. An economic and political organization formed from the consolidation in 1967 of three western European treaty organizations: the European Economic Community, the European Coal and Steel Community, and the European Atomic Energy Community. In 1993 the European Community was integrated into the new European Union. The headlines stated "Europe Is United Again", May 2004 10 nations in eastern Europe and Mediterranean join bloc. Europe stood proudly reunited yesterday almost six decades after it was split in two by the Cold War, as 10 nations in eastern Europe and the Mediterranean took their places in the European Union.

Balance of Payments

The difference in total value between payments into and out of a country over a period. The balance of payments, also known as balance of international payments and abbreviated B.O.P. or BoP, of a country is the record of all economic transactions between the residents of the country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country. It is an important issue to be studied, especially in international financial management field, for a few reasons. The balance of payments (BOP) is the method countries use to monitor all international monetary transactions at a specific period. Usually, the BOP is calculated every quarter and every calendar year.


What are Incoterms or Inco-Terms?

The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law.Incoterms, or "international commercial terms," are trade terms published by the International Chamber of Commerce (ICC). They are commonly used to ease domestic and international trade by helping traders to understand one another.The remaining seven incoterms are regarding all transport modalities. The Incoterms are being prepared and published by the International Chamber of Commerce (ICC).


Open Position

An open position in investing is any trade, established or entered, that has yet to be closed with an opposing trade. An open position can exist following a buy, or long, position or a sell, or short, position.An open position in investing is any trade, established or entered, that has yet to be closed with an opposing trade. An open position can exist following a buy, or long, position or a sell, or short, position. Your open positions are the trades you have made that are still able to incur a profit or a loss. Forward contract that has not been liquidated by an offsetting contract, or by the delivery of the underlying asset.









List of subjects for Diplomaed Associate of the Institute of Bankers, Bangladesh (DAIBB) Exam:


1. Management of Financial Institutions (MFI)

2. Lending Operation & Risk Management (LRM)

3. International Trade & Foreign Exchange (FE)

4. Information Technology in Financial Services (IT)

5. Management Accounting (MA)

6. Central Banking & Monetary Policy (CMP)
or
Agriculture & Microfinance (AM)
or
SME & Consumer Banking (SME)
or
Islamic Banking (Is. B)
or
Investment Banking & Lease Financing (ILF)
or
Treasury Management (TM)

List of subjects for Junior Associate of the Institute of Bankers, Bangladesh (JAIBB) Exam:
1. Principles of Economics & Bangladesh Economy (PBE).
2. Business Communication (BC).
3. Laws and Practice of Banking (LPB).
4. Organization & Management (OM).
5. Accounting for Financial Services (AFS).
6. Marketing of Financial Services (MFS).






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