Glossary terms beginning with A

Accrual

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. 

Adjustable peg

It is a system where a currencies exchange rate is fixed in return to a stronger currency, for example Us Dollar or euro. The exchange rate or the peg rate is fixed occasionally with an intention to facilitate the country’s competitive status. 

Aggregated Risk

The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.

American Option

is a financial option, which can be practiced at any valid business working days throughout the life span of the option.

Appreciation

is an increase in the overall value of the assets. Appreciation can take place for a series of reason such as weakening supply or increase in demand, or change in interest rate or inflation. A currency is said to appreciate when its price rises.

Arbitrage

A risk free financial trading where simultaneously the purchase and sale of a financial product can be conducted in order to generate profit from the difference in price rate. 

Ask

Ask is also known as offer, this is the market price for traders to buy currencies. Ask prices are shown on the right side of a quote, e.g. EUR/USD 1.1745 / 50 denotes that one EUR can be bought for 1.1750 USD.

Asset class

It can be a financial item that has value in the financial market such as stock, bond, forex contacts etc

Asset Allocation

An investment practice that divides capital among different types of asset classes in order to achieve a return that is proportionate to the investor’s risk appetite

At Best

It is guidance or instructions, which are directed to the trader to buy or sell at the best possible rate that is currently prevailing in the market.

At par forward Spread

At a price equal to the face value of a security that occurs at a specific interval

At or Better

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

At the Price Stop-Loss Order

A stop-loss order that must be executed at the requested level regardless of market conditions.

At-the-Money

A financial option, whose exercise or the strike price is equivalent, or near to the current market price.

AUD/USD

It is the abbreviation for the U.S dollar and the Australian dollar (AUD/USD) cross or currency pair. The currency pair is a calculation, which indicates the traders that how many U.S Dollar are required in order to purchase one Australian dollar.

Aussie

It is a slang term, which is used in the forex market for the AUD/USD currency pair.

Authorized Dealer

A dealer whose trading has been approved by the regulatory body of the forex market

Automated Dealer

A trader or investor who uses automatic system or mode of trading without any form of human interpretation

Average Rate Option

It is also called Asian option. It is forex contract where the exercise price is based on the difference average spot and the strike price rate over the time span of the contract.


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