Glossary - Treasury & Capital Markets

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Appreciation	A rise in the value of a currency in terms of a foreign currency.
Arbitrage	The simultaneous buying and selling of foreign exchange to realise profits from discrepancies between exchange rates prevailing at the same time in different markets.
"At best"	Instructions to a bank to buy or sell foreign currency at the most favourable rates obtainable in the market.
At your risk	Rates quoted are subject to change - at the clients risk.
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Bear (Bearish)	Going short or advocating this action in expectation of a depreciation of the base currency.
Bid (Buying) Rate	The price at which a bank will buy the base currency.
Big Figure	The second figure after the decimal point in a price quotation. If the Aussie rate against the USD dollar is 0.6500/05, the big figure is "0.65".
Board Rates	Exchange rates quoted by the banks each day for small foreign exchange transactions (usually under AUD 50,000).
Broken Date	See "Odd Date".
Broker	Brokers arrange for the purchase or sale of foreign currency between banks, but are not a principal to the transaction.
Brokerage	Charges made by a broker for his services in arranging for the purchase or sale of foreign currency between banks.
Bull (Bullish)	Going long or advocating this action in expectation of an appreciation of the base currency.
Business Day	Any day on which a foreign exchange contract can be settled.
Buying Rate	The rate at which a bank buys the quoted base currency.
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Clear Day	See "Business Day".
Confirmation	The written document or telex confirming the foreign exchange deal struck between banks or a bank and a client.
Contract Date	Date of which a transaction is negotiated, as distinct from maturity date, settlement date or value date.
Correspondent	A Bank that, in its own country, handles the business of a foreign bank. There are also domestic correspondents in different areas of the same country.
Cover	Term given to describe the bank's customer procedure in taking out a forward exchange contract to protect itself from the risk of adverse fluctuations in exchange rates.
Covered Interest	Borrowing one currency, converting the proceeds into another.
Cross Rate	In calculating a spot or forward rate between two non-US currencies, reference to their respective quotations in a third currency determines the cross rate eg. "crossing" the USD/JPY and USD/DEM rates gives the DEM/JPY rate.
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Dealing	The buying and selling of foreign currencies in the foreign exchange markets of the world.
Depo	Deposit.
Depreciation	A decline in the value of a currency in terms of a foreign currency.
Devaluation	A downward change in the official parity of an exchange rate from that at which it was previously set. This term is inappropriate in the context of a floating exchange rate regime.
Discount	Base currency interest rates lower than variable currency interest rates.
Dollar	In international finance "the dollar" is always the US dollar. All other "dollar" currencies should be described specifically; eg. Australian dollar, New Zealand dollar.
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Euromarket	A financial market in Europe (principally London) and to a lesser extent, Asia, in which currencies other than the domestic currency are available to deposit or lend. These are termed eurocurrencies. The major currency of denomination is the US dollar (eurodollar), but there are also euroyen, eurodeutschemarks, euroaustralian dollars, etc.
Exchange Control	Government regulations covering the inflow and outflow of foreign exchange securities.
Exchange Rate	The price of one currency against another at a given moment in time.
Exotic Currencies	Currencies not having a developed international market, and which are infrequently dealt.
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Firmer	Indicates that a currency is strengthening or is stronger than previously quoted.
Foreign Exchange Deal	A contract to exchange one currency for another at an agreed price for settlement at an agreed date.
Forex
Forward Contract - Fixed Term	These contracts specify a fixed future date on which it is agreed delivery of the foreign exchange will be effected.
Forward Contract - Optional Term	These forward contracts allow delivery of currencies at any time over a specified time period.
Forward Deal	A contract to buy or sell one currency against another currency for value on a date more than two business days from the spot date.
Forward Margin	The difference between the forward rate and the spot rate of a currency. The forward margin is either at a discount or a premium to the spot rate or, where the forward rate is the same as the spot rate, the margin is referred to as par (this is, zero).
Forward Position	Amount by which forward purchases of any currency exceed forward sales or vice versa for particular maturity date.
FX	Foreign Exchange.
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Hedge	To cover a foreign exchange exposure through an offsetting transaction.
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Interbank Deal	A deal where both counterparties are banks.
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Libor	London inter-bank offered rate. The rate at which first class banks in London offer to lend currencies (especially in US dollars) to one another at a given instant. It is often used as the base interest rate offered by banks for eurocurrency loans in the London foreign exchange market.
Long (Overbought Position)	Excess of purchases over sales or of foreign currency assets over liabilities.
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Margin	Applied to a forward contract, the difference between the forward rate and the spot rate expressed as points.
Maturity Date also (Settlement Date and Value Date):	Date on which the foreign exchange is to be delivered or received
Middle Price	Average of the buying and the selling price for a given currency.
Mio	One million - 1,000,000.
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Odd Date	Maturity date of a forward contract which falls between quoted periods (eg. With quote periods of one and two months forward, a five week contract is considered an "odd date"). Often referred to as a "cock date".
Offer (Selling) Rate	Price at which a bank will sell a currency or make a loan.
Open Position	Difference between total spot and forward purchases and sales in a currency on which an exchange risk is run, or the difference between the totals of foreign currency assets and liabilities.
Outright	An "outright (forward)" is the purchase or sale of foreign currency for delivery at any forward date beyond the spot value date.
Overnight	Between close of business and opening from one day to the next.
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Par	Forward margin is zero, interest rates in the two currencies are the same, therefore there will be no forward margin adjustment to the spot rate.
Point	The last decimal place of an exchange rate quotation. This is sometimes incorrectly called a "pip". A pip is one tenth of a point.
Position	The balance of assets (loans, spot and forward purchases) and liabilities (deposits, spot and forward sales) in a currency.
Premium	Base currency interest rates higher than the variable currency interest rates.
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Revaluation	An upward change in the official parity of an exchange rate from that at which it was previously set. This term is inappropriate in the context of a floating exchange rate regime.
Rollover	The extension of a maturing foreign exchange contract, loan or deposit.
Running a Position	Keeping a long or short open position as a matter of deliberate policy in the hope of a gain.
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Selling Rate	The rate at which a bank sells the quoted currency.
Settlement	Payment of funds on the maturity date of a foreign exchange contract.
Settlement Date	See "Maturity Date"
Sibor	Singapore Inter-Bank Offered Rate - interest rate by banks for loans in US dollars in the Singapore foreign exchange market.
Spot	Foreign currency bought and sold for delivery two business days after the deal is negotiated.
Spot Position	Amount by which spot purchase contracts exceed spot selling contracts in a particular currency or visa versa.
Spot/Next	A FX deal for value on the next business day from spot.
Spread	The difference between the buying and selling rates of a foreign exchange quotation or between the borrowing and lending rates in deposits.
Square Position	Purchases and sales in a currency are equal.
Swap	An agreement where one party provides foreign exchange currency or local currency to another on one date while at the same time, entering into a contract to repurchase the currency on another date.
Swift	Society for Worldwide Inter-bank Financial Telecommunications, which is an international automatic transaction processing network owned by and serving the financial community worldwide.
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The Figure	ie.USD/JPY at 134.00/10, 134 is referred to as "the figure".
Thin Market	A low turnover or nervous market, where an attempt to do a substantial transaction will result in a definite movement in the market rate.
Today/Tomorrow	See "Overnight".
Tomorrow/Next (Tom/Next, T/N)	The next day after value tomorrow.
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Value Date	See "Maturity Date"
Value Today	"Value Today" means settlement occurs today.
Value Tomorrow	"Value Tomorrow" means settlement occurs in one business.day.