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.

The underlying assets or instruments which are traded in the cash market.

Abbreviation for African Development Bank and the Asian Development Bank.

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 or French Franc, 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.

Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.

(1) A 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.

Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.

Size of exposure of a bank to a single customer for both spot and forward contracts.

Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

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.

Amsterdam Inter-bank Offered Rate.

An option which may be exercised at any time prior to expiration. Compared with a European option that can only be exercised on a specific date.

Code name of a telex subscriber, printed automatically by the telex machine.

Describes a currency strengthening in response to market demand rather than by official action.

The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials. The exchange rate differential or Swap points. May be derived from Deposit Rate differentials.

The range of prices within which there will be no possibility to arbitrage between the cash and futures market.

A unit of account based on the movement of 12 Arab currencies against the US dollar.

Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.

Dividing instrument funds among markets to achieve diversification or maximum return.

A senior currency in IMF terminology, which should be freely convertible.

Enables the holder to convert from one style of option to a different style of option over a preset period of time. Sometimes referred to as either a "call-or-put option" or "chooser option".

An accounting unit for the Asian Clearing Union with the same value as an SDR.

The price at which the currency or instrument is offered.

In the context of foreign exchange is the right to receive from a counterparty 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 Forward or spot deal.

Notice to an option holder usually by the clearing house of an exchange traded option that the option has been exercised.

The international society of foreign exchange dealers consisting of national "Forex clubs" affiliated on a world wide basis.

An instruction given to a dealer to buy or sell at the best rate that can be obtained.

An order to deal at a specific rate or better.

An option whose strike/exercise price is equal to or near the current market price of the underlying instrument.

Athens Inter-bank Offered Rate.

The rate for money lent from day to day on the French money market.

Sale of an item to the highest bidder. (1) A method commonly used in exchange control regimes for the allocation of foreign exchange. (2) A method for allocating government paper, such as US Treasury Bills. Small investors are given preferential access to the bills. The average issuing price is then computed on the basis of the competitive bids accepted. In some circumstances for government auctions it is the yield rather than the price which is bid.

A financial institution or bank authorized to deal in foreign exchange.

A US term for an organisation set up by financial institutions agreeing to initiate and receive among themselves electronic transfers of funds authorized by their customers.

A procedure for exchange traded options under which the in the money options are exercised on a given date.

A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Sometimes called an "Asian option".

Settlement and related processes.

(1) Transaction where all the obligations and liabilities in one transaction are mirrored in a second transaction. (2) Transaction where a loan is made in one currency in one country against a loan in another country in another currency.

backwardation.

Term referring to the amount that the spot price exceeds the forward price.

A systematic record of the economic transactions during a given period for a country. (1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements. (2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values.

The value of exports less imports. Invisibles are normally excluded, and is otherwise referred to as mercantile or physical trade. Figures can be quoted on FoB/ FaS , customs cleared, or Fob export, FoB export.

The range in which a currency is permitted to move. A system used in the ERM.

Line of credit granted by a bank to a customer, also known as a " line".

Bank notes are paper issued by the central or issuing bank and are legal tender, but are not usually considered to be part of the FX market. However bank notes can be converted, in some counties, into FX. Bank notes are normally priced at a premium to the current spot rate for a currency.

The rate at which a central bank is prepared to lend money to its domestic banking system.

see trading day and value date.

An option model for valuing American options, an extension of Black Scholes.

A family of path dependent options whose pay-off pattern and survival to the expiration date depend not only on the final price of the underlying currency but also on whether or not the underlying currency breaks a predetermined price level at any time during the life of the option. See Down and Out call/put, Down and in call/put, Up and out call/put, Up and in call/put.

The currency in which the operating results of the bank or institution are reported.

A term used in the UK for the rate used by banks to calculate the interest rate to borrowers. Top quality borrowers will pay a small amount over base.

One per cent of one per cent.

The price expressed in terns of yield maturity or annual rate of return.

The process whereby the basis tends towards zero as the contract expiry approaches.

Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.

The difference between the cash price and futures price.

A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.

British Banking AssociationBear call spread: A spread designed to exploit falling exchange rates by purchasing a call option with a high exercise price and selling one with a low exercise price.

A spread designed to exploit falling exchange rates by purchasing a put option with a high exercise price and selling one with a low exercise price.

A prolonged period of generally falling prices.

Any official action in the market or through regulations which makes it costly or difficult for bears to stay short of a suspect currency.

An investor who believes that prices are going to fall.

Refers to instruments in which ownership can transfer by mere physical delivery, requires no registration as does not have the name of the holder on its face. Certain stamp duty advantages arise from this type of instrument.

Gives the option holder a payoff based on the independent performance of two different instruments.

Firm order with no rate limit stipulated.BetaA measure of relative volatility of the price of the instrument to the overall performance of the market.

The price at which a buyer has offered to purchase the currency or instrument.

Refers normally to the first three digits of an exchange rate that dealers treat as understood in quoting. For example a quote of "30/40" on dollar mark could indicates a price of 1.5530/40BIS: Bank of International Settlement.

A system used where foreign currency is limited. Payments are usually routed through the central banks, and sometimes require that the trade balance is equaled every year.

A binary "call" (or "step up") is like a standard European call option except that the pay off at expiry is fixed at one unit of the counter currency, if the call expires in the money.

An option pricing formula initially derived by Fisher Black and Myron Scholes for securities options and later refined by Black for options on futures. It is widely used in the currency markets.

The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities. If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book. Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York.

The recording of a transaction outside the country where the transaction is itself negotiated.

Slang for Russian trading.

Options are purchased the gains/losses on which offset positions in the underlying currency.

A combination of a horizontal, or calendar, call spread and a horizontal put spread. Both spreads have the same expiration dates on their long and short positions. A bear call spread with a bull put spread is a credit box. A bull call spread with a bear put spread is a debit box.

A plan conceived by Nicholas Brady US Treasury Secretary to reschedule and restructure third world debt.BreakA sudden or rapid fall in instrument pricing.

The price of a financial instrument at which the option buyer recovers the premium, meaning that he makes neither a loss or gain. In the case of a call option, the break even point is the exercise price plus the premium.

In the options market, undoing a conversion or a reversal to restore the option buyer's original position.

The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.

A broad definition of money supply including long term deposits and corporate lending.

Deals that are undertaken for value dates that are not standard periods e.g. 1 month. The standard periods are 1 week, 2 weeks, 1, 2, 3, 6 and 12 months. Terms also used are odd dates, or cock dates, broken period or broken period.

See Dealer.

An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.

Commission charged by a broker.

Bundesbank, the reserve bank of Germany.

A prolonged period of generally falling prices.

An option position composed of both long and short options of the same type, either calls or puts, designed to be profitable in a declining market. An option with a lower strike price is bought and one with a higher strike price is sold.

An investor who believes that prices are going to rise.

Sterling bonds issued in the UK by foreign institutions.

A term for gold bars, not coin.

Central Bank of Germany.

(1) A futures butterfly spread is a spread trade in which multiple futures months are traded simultaneously at a differential. The trade basically consists of two futures spread transactions with either three or four different futures months at one differential. (2) An options butterfly spread is a combination of a bear and bull spread trade in which multiple options months and strike prices are traded simultaneously at a differential. The trade basically consists of two options spread transactions with either three or four different options months and strikes at one differential.

Market activity by an option writer when the writer holds insufficient assets to meet delivery upon expiration.

The valuation of a forward exchange transaction by applying the current exchange rate that would apply to the remaining period of the transaction.

see repurchase agreements.

The purchaser of an option, whether a call or put option. The buyer may also be referred to as the option holder. Option buyers receive the right, but not the obligation, to enter a futures/securities market position.

Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.

To buy the nearby contract and simultaneously sell the deferred contract. Also referred to as a bull spread.

Telegraphic transfer of funds from one centre to another. Now synonymous with inter bank electronic fund transfer.

A term used in the foreign exchange market for the US Dollar/British Pound rate.

An option position comprised of purchase and sale of two option contracts of the same type with different expiration dates at the same exercise price.

Money lent that is repayable on demand.

A call option confers the right but not the obligation to buy stock, shares or futures at a specified price.

(1) An option that gives the holder the right to buy the underlying instrument at a specified price during a fixed period. (2) A period of trading. (3) The right of an bond issuer to pre pay debt and demand the surrender of its bonds.

Overnight (GBP) or Federal funds (USD) currency lent by banks on a very short term basis which can be called the same day, at one days notice or at two days notice.

Overnight (GBP) or Federal funds (USD) currency lent by banks on a very short term basis which can be called the same day, at one days notice or at two days notice.

An agreement with a counterparty that sets an upper limit to interest rates for the cap buyer for a stated time.

Juxtaposition of the long and short term capital imports and exports of a country.

Standards set by BIS for banks.

The market for medium and long term securities.

Short and long term claims and liabilities, which are entered into vis a vis foreign countries, e.g. repayment of foreign debt, direct investments, portfolio investments, purchase of private real estate.

The risk arising from a bank having to pay to the counter party with out knowing whether the other party will or is able to meet its side of the bargain. see Herstatt.

The interest cost of financing securities or other financial instruments held.

Same day settlement.

The market in the actual financial instrument on which a futures or options contract is based.

normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same day deals.

The buying of an asset today and selling a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.

An option written on an underlying cash instrument rather than a futures contract.

A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.

Chicago Board Options Exchange.

Chicago Board of Trade.

Certificate of Deposit.

computerized system for safe custody, delivery and settlement for Eurobonds and related securities. Also the name of an instrument coding system.

A bank which is responsible for controlling a countries monetary policy. It is normally the issuing bank and controls bank licensing, and any foreign exchange control regime.

Exchange rates against the ECU adopted for each currency within the EMS.Currencies have limited movement from the central rate according to the relevant band.

A negotiable certificate in bearer form issued by a commercial bank as evidence of a deposit with that bank which states the maturity value, maturity rate and interest rate payable.CDs vary in size with maturities ranging from a few weeks to several years. CDs may normally be redeemed before maturity only by sale on the secondary market but may also be redeemed back to issuing bank through payment of a penalty.

The Commodity Futures Trading Commission, the US Federal regulatory agency for futures traded on commodity markets, including financial futures.

Clearing House Automated Payment System.

An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.

The New York clearing house clearing system. (Clearing House Interbank Payment System). Most Euro transactions are cleared and settled through this system.

Copenhagen Interbank Rate, the rate at which the banks lend the Danish Krone on an unsecured basis. The rate is calculated daily by the Danmarks Nationalbank (the Danish Central Bank), based on rules set out by the Danish Banker's Association.

Price change limits and trading halts intended to reduce excessive price fluctuations.

An exchange rate that is not materially effected by official intervention.

The price of a bond not including the accrued interest element.

In the UK capital market refers to a price quoted excluding accrued interest.

see trading day.

An exchange-associated, usually independent organisation through which all contracts are made, offset and delivered e.g. ICCH.

A member firm of a clearing house.

The process of setting a number of items against one another and making fund transfers on the net balance only as part of the settlement process.

The process of matching, registering and guaranteeing transactions.

The end of the business day e.g. London 4.30 p.m.

A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.

The purchase of an option identical to one already sold to liquidate a position.

Chicago Mercantile ExchangeCock Dates (see broken dates).

An economic indicator that generally moves in line with the general business cycle such as industrial production.

A combination of a cap and a floor. A collar sets a band within which interest rates will apply (e.g. 10%-13.75%), for a given period.

Commodity Exchange of New York.

Promissory notes usually with up to 270 day maturity, sold by companies or institutions for working capital. Widely used in the US.

The fee that a broker may charge clients for dealing on their behalf.

An option on an option, the dates and price of such option being fixed.

French term for spot settlement in foreign exchange.

US Treasury Department official with the primary role in bank supervision.

A memorandum to the other party describing all the relevant details of the transaction.

Monthly measure of the change in the prices of a defined basket of consumer goods including food, clothing, and transport. Countries vary in their approach to rents and mortgages.

A condition in a futures market where the more distant delivery months trade at a premium to the term delivery months.

A futures contract which is settled by a cash payment reflecting the monetary difference between the initial transaction price and the price of the underlying asset on expiry.

The date on which a currency must be delivered to fulfill the terms of the contract. For options, the last day on which the option holder can exercise his right to buy or sell the underlying instrument or currency.

The month in which a futures contract matures or becomes deliverable if not liquidated or traded out before the date specified.

An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract).

The process by which the futures price moves towards and ultimately equals the price of the underlying instrument at expiration.

Forwards or futures taken to limit or eliminate exposure to currency fluctuations.

Calls are sold on the underlying currency with strikes which are higher than the market price. The strike price limits the profit that can be realized from the position.

A general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as Position Accounts.

The amount by which the price of a convertible bond exceeds the market price of the underlying stock.

The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.

A transaction where the asset is purchased and buys a put option and sells a call option on the asset purchased, each option having the same exercise price and expiry.

A currency that can be freely exchanged for another currency (and or gold) without special authorization from the central bank.

Slang for the Danish krone.

The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.

Broadly equivalent to Retail Price Index or Consumer price.

The other organisation or party with whom the exchange deal is being transacted.

Where a person buys a currency against the dollar it is the dollar value of the transaction.

The risk attached to a borrower by virtue of its location in a particular country. This involves examination of economic, political and geographical factors. Various organisations generate country risk tables.

The annual rate of interest of a bond.

(1) On bearer stocks, the detachable part of the hide behind nominee status. Certificate exchangeable for dividends. (2) Denotes the rate of interest on a fixed interest security.

Exchange rate.

Free exchange rate.

Official exchange rate.

French for "short" as in une position courte.

French term for broker.

(1) To take out a forward foreign exchange contract. (2) To close out a short position by buying currency or securities which have been sold.

Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.

A strategy of writing call options against a long position in the underlying asset. A covered put write being based on a short position in the asset.

The interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover.

Committee on Payment and Settlement Systems.

A method of exchange rate adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line with certain economic or market indicators.

see Lombard rate.

The risk that a debtor will not repay; more specifically the risk that the counterparty does not have the currency promised to be delivered.

A foreign exchange deal entered into involving two currencies, neither of which is the base currency.

A technique using financial futures to hedge different but related cash instruments based on the view that the price movements between the instruments move in concert.

Rates between two currencies, neither of which is the US Dollar.

A cross-trade transaction is a transaction where either the buy broker and the sell broker are the same, or the buy broker and the sell broker belong to the same firm.

The situation which exists when a broker's bid is higher than the lowest offer of another broker.

see band.

Various weightings of other currencies grouped together in relation to a basket currency(e.g. ECU or SDR). Sometimes used by currencies to fix their rate often on a trade weighted basket.

Colloquial term for a unit of account or basket of currencies.

The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.

The value of all exports (goods plus services) less all imports of a country over a specific period of time, equal to the sum of trade and invisible balances plus net receipt of interest, profits and dividends from abroad.

See swaps.

The most current calendar month in which a futures contract comes to maturity and becomes deliverable. Also known as the spot month.

The CUSIP numbering system is the standard method for identifying securities throughout the US financial industry. The CUSIP number is permanently allocated to each issue.

The set of expiration dates applicable to different classes of option.

An order that if not executed on the specific day is automatically canceled.

Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

see intra day position.

The date on which a transaction is agreed upon.

The primary method of recording the basic information relating to a transaction.

An individual or firm acting as a principal, rather than as an agent, in the purchase and/or sale of securities. Dealers trade for their own account and risk.

The panel of communications equipment forming part of a dealer's desk.

A non-secured loan raised by a company, paying a fixed rate of interest.

The ratio of interest and capital repayments as a percentage of the country's export earnings. The treatment of public debt varies.

The latest day or time by which the buyer of an option must indicate to the seller his intention to the option.

Generally a breach of contract. Failure to make timely payment of principal or interest.

Shortfall in the balance of trade, balance of payments, or government budgets.

French term for default.

Distant actively trading contract months, also referred to as back months.

Difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.

Risk that the counterparty is either unable or unwilling to fulfill his payment obligations.

The date of maturity of the contract, when the exchange of the currencies is made This date is more commonly known as the value date in the FX or Money markets.

The calendar month in which a futures contract comes to maturity and becomes deliverable.

Those locations designated by futures exchanges at which the currency represented by a futures contract may be delivered in fulfillment of the contract.

A term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.

The settlement of a futures contract by receipt or tender of a financial instrument or currency.

The change in the value of the option premium made fully paid by the capitalisation of reserves and given relative to the instantaneous change in the value of the; underlying instrument, expressed as a coefficient.

A method used by option writers to hedge risk exposure of written options by purchase or sale of the underlying instrument in proportion to the delta.

A ratio spread of options established as a neutral position by using the deltas of the options concerned to determine the hedge ratio.

Demand led inflation, commonly referred to as too much money chasing too few goods.

Deposit.

French term for discount.

Money Market operations.

Bank and other giro credit balances which can be converted at any time into cash although normally used for cashless payment.

A series of transactions whereby a deposit for a particular currency 1, and the proceeds converted via spot currency into currency 2. Currency 2 is then lent. To cover potential exchange movement a forward sale of currency 2 against currency 1 is entered into which will return the converted amount plus interest into the original currency.

The net position arising from all deposit and loan transactions in a given currency.

A fall in the value of a currency due to market forces rather than due to official action.

A measure of how much a price has to move in order to execute larger than normal transactions. The smaller the price movement and the larger the transaction, the deeper the market.

A broad term relating to risk management instruments such as futures, options, swaps, etc.. The contract value moves in relation to the underlying instrument or currency. The issue of derivatives and their control following large losses by banks and corporates has been subject of much debate.

Term referring to a group dealing with a specific currency or currencies.

All the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.

German options and futures exchange, a fully computerized system with integrated trading and clearing.

Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.

Foreign exchange in German and French respectively.

German for spot exchange market.

German for forward exchange market.

The purchase of a longer maturity option and the sale of a shorter maturity, lower exercise price option. The choice of calls or puts will determine its bear or bull character.

Dublin Inter-bank Offered Rate.

Quoting in fixed units of foreign currency against variable amounts of the domestic currency.

Floating a currency when the rate is controlled by intervention by the monetary authorities.

(1) See forward Rate. Forward rate is lower than spot rate (2) an option that is trading for less than its intrinsic value.

The rate at which a bill is discounted. Specifically it refers to the rate at which a central bank is prepared to discount certain bills for financial institutions as a means of easing their liquidity, and is more accurately referred to as the official discount rate.

Earnings after tax.

Net of tax and fixed personal spending commitments.

A concept in the EMS to measure divergence from the central parity of the currency against the ECU. The thresh-hold for intervention for each currency excludes the currencies weight in the ECU.

Deutsche Mark.

The interest rates applicable to deposits domiciled in the country of origin. Value and values may vary from Eurodeposits due to taxation and varying market practices.

An option either to buy or sell an instrument or currency at a specified price. The exercise of the right to sell causes the right to buy to expire and vice versa.

A call option that expires if the asset price falls below a predetermined level.

The sale of a security at a price lower than the previous one.

abbreviation of Deutsche Terminboerse.

US term for " nostro account".

US term for " vostro account".

A competitive bidding technique where the lowest price to sell the entire amount of the offered instrument is the price at which all instruments are sold. A technique used for some controlled foreign exchange and sovereign debt.

Modest decline in price.

A statistics which indicates current economic growth rates and trends such as retail sales and employment.

European Currency Unit.

Electronic Data Interchange.

An attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.

Electronic Fund Transfer.

In the Euro Interbank deposit market where both bid and offer rates for a particular period are the same.

Name of currency that is to be the vehicle for European monetary union under the Maastricht Treaty.

European Monetary System.

Indicates that both the spot and forward maturity, or two forward maturities in a swap transaction, fall due on the last business day of appropriate calendar months.

A term used for international trade where goods are shipped to a centre for re-export. Hong Kong engages in significant amounts of this form of trade.

European Options Exchange.

The change in the price of an option associated with a 1% change in implied volatility (technically the first derivative of the option price with respect to volatility). Also referred to as eta, vega, omega and kappa.

Exchange Rate Mechanism.

A computerized settlement and depository system for safe custody, delivery of, and payment for Eurobonds.

The rates quoted for Euro-currencies.

A long-term loan issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax.

A currency domiciled outside its country of origin normally held by non residents.

US dollars deposited in a bank (US or non US) located outside the USA.

Swiss French or Belgian francs traded on the Eurocurrency market. Normally Swiss Francs are the more common currency.

Deutschmarks traded on the Eurocurrency market.

A system designed to stabilize if not eliminate exchange risk between member states of the EMS as part of the economic convergence policy of the EU. It permits currencies to move in a measured fashion (divergence indicator) within agreed bands (the parity grid) with respect to the ECU and consequently with each other.

An option that can be exercised only on its expiration date rather than before that date.

The group formerly known as the European Community.

The maintenance by banks of a higher level of funds than is normally desirable, usually arising due to a drop in demand for funds because of economic conditions or interest rates.

A system of controlling inflows and out flows of foreign exchange, devices include licensing multiple currencies, quotas, auctions, limits, levies and surcharges.

An account controlled by the UK Treasury and managed by the Bank of England. Its assets include the country's gold and foreign exchange reserves. Its objective is to manage the exchange rate in accordance with government policy.

A transaction in which the buyer of a cash commodity transfers to the seller a corresponding amount of long futures contracts, or receives from the seller a corresponding amount of short futures, at a price difference mutually agreed upon. In t