Forward contract opportunity profit

Forward contract opportunity profit is the savings a company makes when there is a downturn in an exchange rate, against which it has successfully hedged using a forward contract. Conversely,…

Forward element

The forward element is a concept introduced by the IFRS 9 standards for general hedge accounting and defines the forward points of a forward contract, to distinguish…

Forward points

In forward contracts, forward points are the basis points that are deducted from, or added to, the current spot rate to determine exactly what the forward rate will be on the delivery date. Forward points are calculated according to the…

Forward Premium

A Forward Premium or Forward Points Premium is the positive difference between the value of a specific currency on the spot market and the exchange rate obtained through a forward…

Forward rate agreement (FRA)

A forward rate agreement, or FRA, is another name for a forward contract – an over-the-counter agreement that allows a buyer and seller to fix the price, interest rate or…

Fully convertible currency

A fully convertible currency, also known as a freely convertible currency, is one that can be traded without any limitations imposed by the monetary authorities. They typically come from more…

Functional currency

The functional currency is the currency of the primary economic environment in which a company operates. In other words, it is the currency of the location in which a company…

FX

FX is a common name used for “foreign exchange”, which refers to the trading of one currency for another in the foreign exchange market. Foreign exchange is also known as “forex”,…

FX Accumulator

FX accumulators or accumulator forwards are derivatives that investors use to hedge against FX exposure, securing a more favourable exchange rate than an outright forward for the same period would…

FX broker

An FX broker is an intermediary market maker in foreign exchange who connects currency sellers to currency buyers, making a profit on each transaction. An FX broker typically levies a spread…

FX gain/loss

Foreign currency gains and losses (also known as exchange rate gains and losses) is an accounting concept used to define the impact on international businesses’ financial statements of the fluctuation…

FX global code of conduct

The FX global code of conduct is a set of principles of good practice developed by the Foreign Exchange Working Group (FXWG), a working group created by the Bank…

FX Market Participants

There are four actors who can be classed as FX market participants in traditional banking, that is, those participating in the buying and selling of foreign currencies in the foreign…

FX Policy

Corporate FX or foreign exchange policy defines the set of rules and actions defined by an international company operating in several foreign currencies that are designed to minimise the impact…

FX Policy Guidelines

A company’s FX policy guidelines are the set of rules, limits and procedures established by management to define the company’s risk hedging principles and objectives, simplifying CFO decisions. These guidelines should…