Forex Trading Glossary 2020


Accrual - "Accrual" is the apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.

Actualise - "Actualise" is the underlying assets or instruments, which are traded in the cash market.

Adjustable peg - An"adjustable peg" is the term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency, often the dollar (for example, the pegging of the Russian ruble to that of the American dollar), but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.

Adjustment - This is an official action, normally either by change in the internal economic policies to correct a payment imbalance or in the official currency rate.

Agent bank - (1) An "agent bank" is bank acting for a foreign bank. (2) In the euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.

Aggregate demand - "Aggregate demand" is the term used to describe the total demand for goods and services in the economy. This includes the private and public sector demand for goods and services within the country and the demand of consumers and firms in other countries for good and services.

Aggregate risk - An "aggregate risk" is the size of exposure of a bank to a single customer for both spot and forward contracts.

Aggregate supply - An "aggregate supply" is the total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

Agio - "Agio" is the difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.

Appreciation - "Appreciation" means/describes a currency strengthening in response to market demand rather than by official action.

Arbitrage - This word ("arbitrage") means/describes the simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differential, the exchange rate differential or swap points. May be derived from Deposit Rate differentials.

Arbitrage channel - An"arbitrage channel" is the range of prices within which there will be no possibility to arbitrage between the cash and futures market.

Around - "Around," is the word used in quoting forward "premium/discount." "Five-five around" would mean five points on either side of the present spot value.

Asset allocation - An "asset allocation" is the dividing instrument funds among markets to achieve diversification or maximum return.

Ask - The currency or instrument is offered at this price.

Asset - In the context of foreign exchange - this is the right to receive from a counterpart, an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward or spot deal.

At best - This is an instruction, which is given or issued to a dealer to buy or sell at thebest rate that can be obtained.

At or better - This is an order to deal at a specific rate or better.

Authorised dealer - Is a financial institution or bank authorised to deal in foreign exchange.