The Foreign Exchange Market

Chapter 7

2

The Foreign Exchange Markets

I. INTRODUCTION

A. The Market:

the place where money denominated in one

currency is bought and sold with money denominated in another currency.

3

INTRODUCTION

B. International Trade and Capital Transactions:

- facilitated with the ability to transfer purchasing power

between countries

4

INTRODUCTION

C. Location

1. OTC-type: no specific location

2. Most trades by phone or SWIFT*

*SWIFT: Society for Worldwide Interbank

Financial Telecommunications

5

外匯市場外匯市場並不是一個實體的場所，而是一個連結銀

行、外匯經紀商與經銷商的電子網路。主要銀行互相交易的批發市場。

即期市場：在交易完成後的兩個營業日內完成交割。佔市場的 33%

遠期市場佔 11%

換匯交易 56%

交易通常是透過電話、電報或 SWIFT 系統來進行的。

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PART II. ORGANIZATION OF THE FOREIGN EXCHANGE MARKET

I . PARTICIPANTS IN THE FOREIGN EXCHANGE MARKET

A. Participants at 2 Levels

1. Wholesale Level (95%)

- major commercial banks

2. Retail Level

- banks dealing for business customers.

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ORGANIZATION OF THE FOREIGN EXCHANGE MARKET

B. Two Types of Currency Markets

1. Spot Market:

- immediate transaction

- recorded by 2nd business day

2. Forward Market:

- transactions take place at a specified future date

8

ORGANIZATION OF THE FOREIGN EXCHANGE MARKET

C. Participants by Market

1. Spot Market

a. Commercial banks

b. Brokers

c. Customers of commercial banks

d. Central banks

9

ORGANIZATION OF THE FOREIGN EXCHANGE MARKET

2. Forward Market

a. Arbitrageurs

(holds currency)

b. Speculators

c. Hedgers

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遠期市場主要參與者套利者 (arbitrageurs)

希望利用不同國家間的利率差異來賺取無風險利潤。交易者 (traders)

使用遠期合約來消除或彌補以外幣計價的進出口訂單可能產生損失的風險。

避險者 (hedgers)大多為多國籍企業為了保護其資產負債表內以外國貨幣計價、且在遠期合約到期

前不會被變賣的各種資產與負債，換算成母國貨幣後的價值。投機者 (speculators)

透過買賣遠期貨幣的方式，積極地將自己暴露於貨幣風險中，以期能從匯率的波動中獲利。

11

ORGANIZATION OF THE FOREIGN EXCHANGE MARKET

II. SIZE OF THE CURRENCY MARKET

A. Largest in the world (1999):

$1.5 trillion daily

B. Market Centers (1998):

London = $637 billion daily

New York= $351 billion daily

Tokyo = $149 billion daily

C. Benchmark:

1999 USGDP = $9.1 trillion

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外匯市場規模世界上最大的金融市場。 在 1998 年的高峰之後，外匯交易量開始往下掉。

12 個歐洲貨幣被歐元所取代。電子交易的興起

貨幣交易市場排名：倫敦紐約東京

熱絡的交易幣別：Dollar/euro

Dollar/yen

Dollar/sterling

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PART III. THE SPOT MARKET

I. SPOT QUOTATIONS

A. Sources

1. All major newspapers

2. Major currencies have four different quotes:

a. spot price

b. 30-day

c. 90-day

d. 180-day

14

THE SPOT MARKET

B. For nonbank customers:Direct quote

gives the home currency price of one unit of

foreign currency.

EXAMPLE in France :€.80/US$

Indirect quote is the reciprocal

15

即期報價 1/2

涉及美元時：美式報價（ American terms ，每一單位外國貨幣

值多少美元）歐式報價（ European terms ，每一單位美元值

多少外國貨幣）來表示。除了英國及愛爾蘭外，所有的國家皆採歐式報價。

16

即期報價 2/2

與非銀行的顧客交易時：直接報價 (direct quotation) 系統。匯率直接報價

是提供某一特定數量之外國貨幣的本國貨幣價格。

「間接報價」 (indirect quotation) 就以外國貨幣來報本國貨幣的價值。

17

即期報價

18

THE SPOT MARKET

C. Transactions Costs

1. Bid-Ask Spreadused to calculate the feecharged by the bank

2. Bid = the price at which the bank is willing to buy 3. Ask = the price it

will sell the currency

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買價與賣價買價 (buy price 、 bid price) ；賣價 (sell rate 、 ask rate 、 offer rate) ：例：英鎊報價 $1.7442-53 －銀行願意以 $1.7442 的

價格買進英鎊，並以 $1.7453 的價格賣出英鎊。若將美式報價轉為歐式報價，或將直接報價轉換為

間接報價時，要把買價與賣價顛倒。銀行一定是買低賣高。

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交易成本買賣價差 (bid-ask spread) 是指貨幣買價與賣價

之間的差距。與該貨幣的市場深度與廣度、以及該貨幣的波動

度有關。 例：英鎊的報價為 $1.7442–53 ，其價差百分比

等於 0.063% 。對於廣泛交易的貨幣，像是英鎊、歐元、瑞士法

郎以及日圓，其價差大約在 0.05% 到 0.08%之間。

21

THE SPOT MARKET

4. Percent Spread Formula:

Percent Spread = (Ask-Bid)/Ask x 100

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Sample Problem

Suppose the spot quote for the Swedish Krona is $.1395-99, what is the percent spread?

PS = Ask –Bid x 100 Ask

= .1399 - .1395 x 100.1399

= .29% or 29 basis points

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THE SPOT MARKET

D. Cross Rates

1. The exchange rate between 2 non-US$ currencies.

2. Purpose: to identify arbitrage opportunities

24

交叉匯率 1/2

交叉匯率 (cross rates)例如：若歐元是賣在 $1.20 ，而瑞士法郎的買價是

0.80 ，則€ /SFr 的交叉匯率是€1=SFr 1.5 。套匯 (currency arbitrage)

利用不同市場間匯率報價的不一致來賺錢。牽涉到在某一市場買入某一種貨幣，而在另一市場

將之賣出。 利用套匯交易獲利的過程中，貨幣的買與賣會將匯

率改變，因而逐漸將未來的獲利機會消除掉。

25圖表 7.7 三角套匯 (triangular currency arbitrage)

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Sample Problem

Suppose the spot quote for the Swedish

Krona and the French franc are $.1395/kr and $.1133/FF, what is the quote for the krona in Paris?

$.1133

FF = _FF_ = 8.826 x US$ = 8.826

kr $.1395 US$ 7.168 7.168

kr

= FF1.23/kr

27

THE SPOT MARKET

E. Currency Arbitrage

1. When cross rates differ from

one financial center to another,

profit opportunities exist.

2. Buy cheap in one int’l market,

sell at a higher price in another

3. Importance of Arbitrage

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Sample Problem

Suppose the euro is quoted in London at £.6064-80 and the £ is quoted in Frankfurt at € 1.6244-59. Is there a profitable arbitrage situation?

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Sample Problem

London Frankfurt

£.6064-80/€ €1.6244-59/£

Bid Ask Bid Ask

.6064 .6080 .6150 .6156

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Sample Problem

1. Buy euros for £ .6080 / € in London.

2. Use them in Frankfurt to buy pounds at €1.6259 (same as selling euros at £.6150).

3. This is a net profit is

.6150-.6080= £.0070 per euros

4. A yield of 1.16% (.0070/.6080)

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Compute the percent spread

Pound spread = (1.6259-1.6244)/1.6259 = .09%

Euro spread = (.6080-.6064)/.6080 = .26%

32

CURRENCY ARBITRAGE

What is The Critical Role of Arbitrage in the Global Financial Markets?

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PART III. THE FORWARD MARKETI. INTRODUCTION

A. Definition of a Forward Contract

an agreement between a bank and a

customer to deliver a specified amount

of currency against another currency

at a specified future date and at a fixed

exchange rate.

34

THE FORWARD MARKET

2. Purpose of a Forward:

Hedging

the act of reducing exchange rate risk.

35

THE FORWARD MARKET

C. Forward Contract Maturities1. Contract Terms

a. 30-dayb. 90-dayc. 180-dayd. 360-day

2. Longer-term Contracts3. Require performance

36

THE FORWARD MARKET

CALCULATING THE FORWARDPREMIUM OR DISCOUNT

= F-S x 12 x 100 S n

where F = the forward rate of exchange S = the spot rate of exchange n = the number of months in the

forward contract

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Sample Problem

What is the forward discount or premium if the 30 day forward rate is $1.4498/£ and the spot is $1.4487?

360100

1.4498 1.4487 360100

1.4487 30.91%

F Sx x

S n

x x

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Sample Problem

What is the forward discount or premium if the 3 month forward rate is $1.4511/£ and the spot is $1.4487?

12100

1.4511 1.4487 12100

1.4487 3.66%

F Sx x

S n

x x

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遠期報價 1/2

直接遠期匯率 (outright rate) ：以實際價格來報價。

換匯匯率 (swap rate) ：以相對於即期匯率的價差來報價。若一外幣以美元表示的遠期匯率低於即期匯率，

則此外幣有遠期折價 (forward discount) 。反之，若遠期匯率高於即期匯率，則有遠期溢價

(forward premium) 。

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遠期報價 2/2

年化後之遠期匯率與即期匯率差距的百分比。

判斷折溢價：當遠期買價的點數小於賣價的點數時，則

遠期匯率為溢價。若買價的點數超過賣價的點數，則遠期合

約為折價，此點數必須從即期價格中扣除。

360

遠期匯率 即期匯率遠期溢價或折價

即期匯率 遠期合約之天數

41

遠匯報價範例換匯匯率

直接遠期匯率

42

遠期合約 1/2

買賣價差遠期市場的價差會受到合約所涉及貨幣之市場廣度（交易量）以及遠期合約本身之風險所影響。

遠期合約的買賣價差會隨著貨幣波動度與到期日的增加而變大。

自 1970 年代早期以來，幾乎所有貨幣的買賣價差都變大，這可能是外匯市場振盪幅度加大所致。

交叉匯率：表示方式與即期交叉匯率 (cross rates)大致相同。

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遠期合約 2/2

到期日：通常有 30天、 60天、 90天、 180天、 360天

等天期的合約可供交割。銀行也會因應顧客的需求而為其量身訂做到期日較為特殊。如畸零天期（ 77天），的遠期合約。