Kafli 9 - Global Foreign-Exchange Markets Exam
Questions and Answers
1. What is foreign exchange (FX)? Correct Answer: FX is money denominated in the currency
of another nation (or group of nations). The market in which such transactions take place is the
foreign-exchange market
2. Exchange rate Correct Answer: Correct Answer: Is the price of a currency in terms of another.
This rate changes throughout the day. On January 28, 2022, 1 EUR could buy 146,6 ISK.
3. The Bank for International Settlements Correct Answer: Correct Answer: Is owned
and controlled by 60 member central banks and divides the FX market into reporting dealers
(large financial institutions such as Bank of America, Deutsche Bank, Barclays etc.), other financial
institutions and nonfinancial institutions (governments and comanies)
4. How to trade foreign exchange Correct Answer: Correct Answer: Dealers can trade FX
directly with customers, through voice brokers,
through electronic brokerage systems or directly through interbanks
5. Two major segments of the FX market Correct Answer: Correct Answer: Over the counter
market (OTC) between commercial and investment banks
Exchange traded market such as NASDAQ
6. Spot transactions Correct Answer: Correct Answer: Exchange of currency for delivery in two
business days after the day the transaction was made. The rate at which the transaction is settled is
the spot rate
7. Outright forward transactions Correct Answer: Correct Answer: Exchange of currency
on a future date beyond two business days. Single purchase or sale of a currency for future delivery.
The rate at which the transaction is settled is the forward rate. The forward transaction will be settled at the
forward rate no matter what the actual spot rate is at the time of the settlement
8. FX swap Correct Answer: Correct Answer: One currency is traded for another on one date and
then swapped back later. Most often, the first or short leg of an FX swap is a spot transaction and the
second or long leg a forward transaction
9. Currency swap Correct Answer: Correct Answer: Trade of interest-bearing financial
instruments (such as bonds) with the exchange of principal and interest payments
10. Options Correct Answer: Correct Answer: the right, but not the obligation, to trade foreign
currency in the future
11. Future contracts Correct Answer: Correct Answer: agreement between two parties to buy or
sell a particular currency on a particular future
date as specified in a standardized contract to all participants in a currency futures exchange rather than
1/
5
,Kafli 9 - Global Foreign-Exchange Markets Exam
Questions and Answers
over the counter
12. Five reasons why the dollar is so widely traded Correct Answer: Correct
Answer: It's an investment currency in may capital markets
It's a reserve currency held by many central banks
It's a transaction currency in many international commodity
markets It's an invoice currency in many contracts
It's an intervention currency employed by monetary authorities in market operations to influence their own
exchange rates
2/
5
Questions and Answers
1. What is foreign exchange (FX)? Correct Answer: FX is money denominated in the currency
of another nation (or group of nations). The market in which such transactions take place is the
foreign-exchange market
2. Exchange rate Correct Answer: Correct Answer: Is the price of a currency in terms of another.
This rate changes throughout the day. On January 28, 2022, 1 EUR could buy 146,6 ISK.
3. The Bank for International Settlements Correct Answer: Correct Answer: Is owned
and controlled by 60 member central banks and divides the FX market into reporting dealers
(large financial institutions such as Bank of America, Deutsche Bank, Barclays etc.), other financial
institutions and nonfinancial institutions (governments and comanies)
4. How to trade foreign exchange Correct Answer: Correct Answer: Dealers can trade FX
directly with customers, through voice brokers,
through electronic brokerage systems or directly through interbanks
5. Two major segments of the FX market Correct Answer: Correct Answer: Over the counter
market (OTC) between commercial and investment banks
Exchange traded market such as NASDAQ
6. Spot transactions Correct Answer: Correct Answer: Exchange of currency for delivery in two
business days after the day the transaction was made. The rate at which the transaction is settled is
the spot rate
7. Outright forward transactions Correct Answer: Correct Answer: Exchange of currency
on a future date beyond two business days. Single purchase or sale of a currency for future delivery.
The rate at which the transaction is settled is the forward rate. The forward transaction will be settled at the
forward rate no matter what the actual spot rate is at the time of the settlement
8. FX swap Correct Answer: Correct Answer: One currency is traded for another on one date and
then swapped back later. Most often, the first or short leg of an FX swap is a spot transaction and the
second or long leg a forward transaction
9. Currency swap Correct Answer: Correct Answer: Trade of interest-bearing financial
instruments (such as bonds) with the exchange of principal and interest payments
10. Options Correct Answer: Correct Answer: the right, but not the obligation, to trade foreign
currency in the future
11. Future contracts Correct Answer: Correct Answer: agreement between two parties to buy or
sell a particular currency on a particular future
date as specified in a standardized contract to all participants in a currency futures exchange rather than
1/
5
,Kafli 9 - Global Foreign-Exchange Markets Exam
Questions and Answers
over the counter
12. Five reasons why the dollar is so widely traded Correct Answer: Correct
Answer: It's an investment currency in may capital markets
It's a reserve currency held by many central banks
It's a transaction currency in many international commodity
markets It's an invoice currency in many contracts
It's an intervention currency employed by monetary authorities in market operations to influence their own
exchange rates
2/
5
