1. Purchasing power parity
    the theory that the prices of tradable goods will tend to equalize across countries
  2. Law of one price
    the theory that the relative prices of any single good between countries, Expressed in each country's currency, is representative of the proper or appopiate exchange rate value
  3. Foreign Currency exchange rate
    the price of any one country's currency in terms of another country's currency
  4. direct exchange quotation
    A foreign exchange quotation that specifies the amount of home-country currency needed to purchase one unit of foreign currency
  5. Indirect exchange quotation
    Foreign exchangequotation that specifies the units of foreign currency that could be purchased with one unit of the home currency
  6. Spot exchange rates
    Contracts that provide for two parties to exchange currencies, with delivery in two business days
  7. Forward exchange rates
    Cantracts that provide for two partiese to exchange currencies on a furturedate at an agreed-upon exchange rate
  8. European Terms
    Quating a currency rate as a country's currency against the U.S. dollar
  9. American Terms
    Quating a currency rate as the U.S. dollar against another country's currency (e.g. U.S. dollars/yen)
  10. Cross rates
    Exchange rate quatations that do not include the U.S. dollar as one of the two currencies quoted
  11. Triangular Apbitrage
    The exchange of one currency for a second currency, the second for a third, and the third for the first in order to amke a profit
  12. Gold Standard
    the standard for international currencies in which currency values were stated in terms of gold
  13. Bretton woods agreement
    An agreement reached in 1944 amoung finance ministers of 45 western nations to establish a system of fixed exchange rates
  14. Direct intervention
    The process governments used in the 1970's if they wished to alter the current value of their currency. It was done by simply buying or selling their own currency in the market using their reserves of other major currencies
  15. Coordinated intervention
    A currency-value management method whereby the central banks of the major nations simultaneously intervene in the currency markets, hoping to change a currency value.
  16. Eurocurrency
    The bank deposit in a currency other than the currency of the country where the bank is located not cinfined to banks in Europe
  17. EuroDollars
    U.S. dollars deposited in banks outside the united states; not cinfined to banks in Europe
  18. Interbank Interest Rates
    the interest rate charged by banks to banks in the major international financial centers
  19. Euromarkets
    Money and capital markets in which transactions are denominated in a currency other than that of the place of transaction; not confined to Europe
  20. Selling Forward
    A Market transaction in which the seller promises to sell currency at a certain future date at a pre-specified price
  21. Offshore Banking
    The use of banks or banks branches located in low tax countries, often caribbean islands, to raise and hold capital for multinational operations
  22. Correspondent banks
    Banks located in differnt countires and unrealted by ownership that have a reciporcal agreement to provide services to the other's customers.
  23. Representative office
    An office of an international bank established in a foreign country to serve the bank's customers in the area in an advisorycapacity; it does not take deposits or make loans
  24. International Bond
    the bond issued in domestic capital markets by foreign borrowers (foreign bonds) or issued in the eurocurrency markets in the currency different from that of the borrower (Eurobankds)
  25. Foreign Bond
    Bonds issued by a foreign corporation or government for sale in a country different from its home country, and denominated in the currency of the country in which it is issued
  26. Eurobond
    A bond that is denominated in a currency other than the currencyof the country in which the bond is sold
  27. Bearer Bond
    A bond owned offcially by whoever is holding it
  28. American Depository Receipts (ADRS
    Receipts to bank account that holds shares of a foreign firm's stock in that firm's country
Card Set