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major currency pair

Major currency pairs are the most widely traded currency pairs: EUR-USD, USD-JPY, GBP-USD and USD-CHF. According to data from the Bank for International Settlements (BIS), the U.S. dollar is the most widely traded currency, being on one side of 88% of all trades in the $6.1 trillion/day FX market. Other major currency pairs include EUR-CHF, […]

managed floating exchange rate

A managed floating exchange rate (also known as dirty float’) is an exchange rate regime in which the exchange rate is neither entirely free (or floating) nor fixed. Rather, the value of the currency is kept in a range against another currency (or against a basket of currencies) by central bank intervention. By far the […]

margin

Margin is the security required from the borrower in all kinds of financial transactions. It protects lenders against the risk of a payment default. If a borrower fails to pay the amount owed on the due date, the lender can claim the collateral in order to minimise losses from the defaulted payment. Margin is a […]

margin call

A margin call is a demand to deposit additional funds or securities to cover possible losses. A margin call usually indicates that the collateral held for a given position has lost value. Let us imagine a situation where a ‘short’ EUR forward position is initiated, on which a 5% margin is requested. The position is […]

margin deposit

A margin deposit refers to the funds held in security that is required as a protection against possible losses. Let us imagine a situation where a ‘short’ EUR forward position is initiated, on which a 5% margin is requested. The position is ‘long’ USD 100,000 and the forward rate is EUR-USD 1.1111. Measured in EUR, […]

margin requirement

Margin requirement is a financial concept related to the minimum amount in collateral that the issuer of a financial security requests from the buyer, to hedge against the risk of adverse price movements or the buyer defaulting. In the foreign exchange markets, businesses or individuals who wish to enter a currency forward contract in order […]

margin risk

Margin risk, in the context of FX risk management, refers to the impact of unexpected currency fluctuations on operating profit margins. A Europe-based exporter to the United States could see operating profit margins decrease in the event of a sharp EUR appreciation, as it would be forced to slash USD selling prices in order to […]

mark-to-market

Mark-to-market is a valuation method aimed at providing a measurement based on current market conditions. Because mark-to-market is based on current market values, it gives a realistic picture of a company’s financial position. Originally introduced to assess the value of futures contracts, mark-to-market accounting has become prominently used in over-the-counter derivatives markets, including forward markets, […]

market maker

In financial markets, the figure of a market maker defines any company with the power to set buy and sell prices of financial instruments or commodities. The U.S. Securities and Exchange Commission defines it as “a firm that stands ready to buy and sell a particular stock on a regular and continuous basis at a […]

market order

In FX trading, a market order is an order to buy or sell a currency immediately, whether it is undertaken in the spot or forward market. This type of order guarantees that the order will be executed, but does not guarantee the execution price. A market order generally will execute at or near the current […]