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Glossaire

Découvrez le monde complexe de la gestion des devises grâce à notre dictionnaire complet de termes et définitions financiers.

Dynamic Hedging
Dynamic Hedging

Created by Kantox, Dynamic Hedging is a Currency Management Automation software solution that eliminates all or most FX risk and enables managers to capture the growth opportunities that result from buying and selling in local currencies. By keeping FX risk at bay, Dynamic Hedging allows firms to take control of their own competitiveness.  Dynamic Hedging automates —in accordance with business rules defined by each company— the three phases of the hedging process: pre-trade (exposure collection and monitoring), trade (forward transaction execution), and post-trade (reporting management). For this reason, Dynamic Hedging is known as an ‘end-to-end’ solution.

Kantox’s Currency Management Automation solutions integrate Dynamic Hedging and allow companies to deploy the hedging programs that best responds to the needs of the business, taking into account the firm’s pricing parameters, degree of forecast accuracy, and situation in terms of forward points.

Whether a company desires to protect its budget from FX fluctuations with static, rolling or layered programs, or whether it aims at ‘microheding’ its many foreign currency-denominated transactions, Dynamic Hedging ensures that the firm systematically achieves its risk management goals.

a
accounting currency
accounting currency

The accounting currency is the monetary unit used by a firm to record its transactions and to present its financial statements. The accounting currency is also known as the reporting currency or presentation currency. In most cases, the accounting currency is also the firm’s ‘functional currency’, i.e. the currency in which it primarily generates and expends its cash.A company can decide to present its financial statements in a currency different from its functional currency, for example when preparing a consolidated report for its parent in a foreign country. While a company can choose its accounting currency, it cannot change its functional currency.

accounts payable
accounts payable

Accounts payable are liabilities arising from the purchase of merchandise, supplies, and services on credit. Accounts payable require the company to make payment in the future. They are typically registered on the balance sheet when the firm receives an invoice. Accounts payable generally do not call for interest payments.Together with accounts receivable, accounts payable are the key input when a firm hedges balance sheet items in Micro Hedging Programs.

authorised payment institution
authorised payment institution

The UK Financial Conduct Authority (FCA) defines an authorised payment institution as a person authorised as a payment institution under the Payment Services Regulations and included in the Financial Services register to that effect.The Financial Conduct Authority is the regulator of the more than 50,000 firms offering financial services in the UK, including cross-border payment providers, to ensure that markets work efficiently for business and individuals and are honest, fair and effective towards consumers.

b
balance sheet hedging
balance sheet hedging

Balance sheet hedging is a hedging program designed to protect FX-denominated assets and liabilities from changes in value due to exchange rate fluctuations. Balance sheet hedging is concerned with a firm’s accounting exposure, as managers desire to eliminate accounting FX gains and losses on their financial statements.Because accounting exposure arises later than economic exposure —which starts from the moment a transaction is priced— balance sheet hedging is not designed to protect a firm’s profit margin from currency risk. It is carried out mostly for the purposes of reporting, as the accounting exposure is clearly visible on financial statements.Currency Management Automation solutions allow companies to combine a balance sheet hedging program with different types of budget hedging programs —static, rolling, layered— and with programs that hedge firm commitments.

base currency
base currency

The base currency is the first currency appearing in a currency pair quotation. The second currency quoted expresses the number of units of that currency that are equal to one unit of the base currency. For example, if the EUR-USD is quoted at 1.25, EUR is the base currency, and USD is the quote currency.It means, in this example, that one EUR is worth 1.25 USD. In most quoting conventions, USD is the base currency for emerging market currencies: USD-BRL, USD-TRY, USD-RBL, etc. In futures markets, which are mostly based in the United States, the base currency is always the foreign currency.

base currency interest rates
base currency interest rates

The base currency interest rate is the short-term or money-market interest rate of the currency that, in a currency pair, is quoted first. For example, if the EUR-USD is quoted at 1.25, EUR is the base currency, and the money-market interest rate on EUR is the base currency interest rate. Alongside the money-market interest rate on the quoted currency, the base currency interest rate is used to calculate the forward exchange rate. When calculating the forward rate with the Interest Parity Theorem, the base currency interest rate features in the denominator of that well-known formula.

bid/ask spread
bid/ask spread

The bid-ask price is the difference in the price of one currency in terms of the other as shown by banks, brokers and dealers in the foreign exchange market. Banks do not normally charge a commission on their currency transactions, but they profit from the spread between the buying and selling rates on both spot and forward transactions.Quotes are always given in pairs because a dealer usually does not know whether a prospective customer is in the market to buy or to sell a foreign currency. The first rate is the ‘bid’ (or buy) price; the second is the ‘ask’ (or offer) rate. As an example, if GBP-USD is quoted at 1.3018-1.3027, it means that the bank is willing to buy GBP at 1.3018 USD and sell them at 1.3027. A customer of the bank can be expected to sell GBP to the bank at 1.3018 USD and buy them at 1.3027 USD. The dealer will profit from the 0.0009 USD spread between the bid and ask rates.

blocked currency
blocked currency

A blocked currency, also known as a non-convertible currency, is the monetary unit of a country where holders of the currency do not have the right to convert it freely at the going exchange rate into any other currency. A currency is considered to be blocked if it fulfills one or more of the following three criteria about usability, exchangeability and market value:it cannot be used for all purposes without restrictions;it cannot be exchanged for another currency without limitations;It cannot be exchanged at a given exchange rate.

break forward
break forward

A break forward, also known as cancellable forward, cancellable option or knock-on forward, is an option-like contract used to obtain full participation in a market move in the underlying (for example, a currency) beyond a specified level without payment of an explicit option premium.Break forwards are rarely used when hedging regular foreign currency inflows and outflows. They can be an efficient hedge tool, however, in the event of possible, but contingent, business events.

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