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Tables of Contents for All About...the Foreign Exchange Market in the United States
Chapter/Section Title
Page #
Page Count
Foreword
1
2
Trading Foreign Exchange A Changing Market in a Changing World
3
6
How the Global Environment Has Changed
3
1
How Foreign Exchange Turnover Has Grown
4
5
Some Basic Concepts Foreign Exchange, the Foreign Exchange Rate, Payment and Settlement Systems
9
6
Why We Need Foreign Exchange
9
1
What ``Foreign Exchange'' Means
9
1
Role of the Exchange Rate
9
2
Bilateral and Trade-Weighted Exchange Rates
10
1
Payment and Settlement Systems
11
4
Payments via Fedwire and CHIPS
12
3
Structure of the Foreign Exchange Market
15
8
It Is the World's Largest Market
15
1
It Is a Twenty-Four Hour Market
16
2
The Market Is Made Up of an International Network of Dealers
18
1
The Market's Most Widely Traded Currency Is the Dollar
19
2
It Is an ``Over-the-Counter'' Market With an ``Exchange-Traded'' Segment
21
2
The Main Participants in the Market
23
8
Foreign Exchange Dealers
23
1
Financial and Nonfinancial Customers
24
1
Central Banks
25
2
Classification of Exchange Rate Arrangements, September 1997
26
1
Brokers
27
4
In the Over-the-Counter Market
27
2
Voice Brokers
29
1
Automated Order-Matching or Electronic Broking Systems
29
1
In the Exchange-Traded Market
30
1
Main Instruments: Over-the-Counter Market
31
28
Spot
31
5
There Is a Buying Price and a Selling Price
32
1
How Spot Rates Are Quoted: Direct and Indirect Quotes, European and American Terms
32
1
There Is a Base Currency and a Terms Currency
33
1
Bids and Offers Are for the Base Currency
33
1
Quotes Are in Basis Points
34
1
Cross Rate Trading
34
1
Deriving Cross Rates From Dollar Exchange Rates
34
2
Outright Forwards
36
4
Relationship of Forward to Spot-Covered Interest Rate Parity
36
1
Role of the Offshore Deposit Markets for Euro-Dollars and Other Currencies
37
1
How Forward Rates Are Quoted by Traders
38
1
Calculating Forward Premium/Discount Points
38
1
Non-Deliverable Forwards (NDFs)
39
1
FX Swaps
40
4
Why FX Swaps Are Used
40
1
Pricing FX Swaps
41
1
Some Uses of FX Swaps
41
2
Calculating FX Swap Points
43
1
Currency Swaps
44
1
Purposes of Currency Swaps
44
1
Over-the-Counter Foreign Currency Options
45
14
The Pricing of Currency Options
48
3
Delta Hedging
51
1
Put-Call Parity
52
1
How Currency Options Are Traded
52
1
Options Combinations and Strategies
53
1
Foreign Exchange Options Galore
54
5
Main Instruments: Exchange-Traded Market
59
8
Exchange-Traded Futures
59
5
Development of Foreign Currency Futures
62
1
Quotes for Foreign Currency Futures
63
1
Exchange-Traded Currency Options
64
1
Linkages
65
2
Linkages Between Main Foreign Exchange Instruments in Both OTC and Exchange-Traded Markets
65
2
How Dealers Conduct Foreign Exchange Operations
67
10
Trading Room Setup
67
1
The Different Kinds of Trading Functions of a Dealer Institution
68
1
Trading Among Major Dealers-Dealing Directly and Through Brokers
69
4
Mechanics of Direct Dealing
69
2
Mechanics of Trading Through Brokers: Voice Brokers and Electronic Brokering Systems
71
2
Operations of a Foreign Exchange Department
73
2
Back Office Payments and Settlements
75
2
Managing Risk in Foreign Exchange Trading
77
8
Market Risk
77
3
Measuring and Managing Market Risk
78
1
Value at Risk
78
2
Credit Risk
80
3
Settlement Risk-A Form of Credit Risk
81
1
Arrangements for Dealing with Settlement Risk
82
1
Sovereign Risk-A Form of Credit Risk
83
1
Group of Thirty Views on Credit Risk
83
1
Other Risks
83
2
Foreign Exchange Market Activities of the U S Treasury and the Federal Reserve
85
12
U.S. Foreign Exchange Operations Under Bretton Woods
86
2
Authorization and Management of Intervention Operations
87
1
U.S. Foreign Exchange Operations Since the Authorization in 1978 of Floating Exchange Rates
88
3
Executing Official Foreign Exchange Operations
91
2
Techniques of Intervention
92
1
Reaching Decisions on Intervention
93
1
Financing Foreign Exchange Intervention
94
3
Evolution of the International Monetary System
97
10
The Gold Standard, 1880-1914
97
2
The Inter-War period, 1919-1939
99
1
The Bretton Woods Par Value Period, 1946-1971
100
3
The Floating Rate Period, 1971 to Present
103
4
The Determination of Exchange Rates
107
12
Some Approaches to Exchange Rate Determination
107
6
The Purchasing Power Parity Approach
107
1
The Balance of Payments and the Internal-External Balance Approach
108
1
The Monetary Approach
109
1
The Portfolio Balance Approach
110
1
Measuring the Dollar's Equilibrium Value: A Look at Some Alternatives
111
1
How Good Are the Various Approaches?
112
1
Foreign Exchange Forecasting in Practice
113
2
Assessing Factors That May Influence Exchange Rates
114
1
Official Actions to Influence Exchange Rates
115
4
Continuing Close G7 Cooperation in Exchange Markets
117
2
Epilogue: What lies Ahead?
119
6
Global Financial Trends
119
2
Introduction of the Euro
119
1
Increased Trading in Currencies of Emerging Market Countries
120
1
Shifting Structure of the Foreign Exchange Market
121
1
Consolidation and Concentration
121
1
Automated Order-Matching Systems
121
1
New Instruments, New Systems
122
3
Footnotes
125