Glossary of Forex Terms...=3

C -

Cable - A term used in the foreign exchange market for the US Dollar/British Pound rate.

Capital Risk - The risk arising from a bank having to pay to the counter party with out knowing whether the other party will or is able to meet its side of the bargain. see Herstatt.

Carry - The interest cost of financing securities or other financial instruments held.

Cash Delivery - Same day settlement.

Cash market - The market in the actual financial instrument on which a futures or options contract is based.

Cash - normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same day deals.

Cash and Carry - The buying of an asset today and selling a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.

Cash Settlement - A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.

Central Bank - A bank which is responsible for controlling a countries monetary policy. It is normally the issuing bank and controls bank licensing, and any foreign exchange control regime.

Central Rate - Exchange rates against the ECU adopted for each currency within the EMS.Currencies have limited movement from the central rate according to the relevant band.

Chartist - An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.

Clean float - An exchange rate that is not materially effected by official intervention.

Closed position - A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.

Commission - The fee that a broker may charge clients for dealing on their behalf.

Confirmation - A memorandum to the other party describing all the relevant details of the transaction.

Contract - An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract).

Conversion Account - A general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as Position Accounts.

Conversion - The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.

Conversion arbitrage - A transaction where the asset is purchased and buys a put option and sells a call option on the asset purchased, each option having the same exercise price and expiry.

Convertible currency - A currency that can be freely exchanged for another currency (and or gold) without special authorization from the central bank.

Copey - Slang for the Danish krone.

Correspondent Bank - The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.

Counterparty - The other organisation or party with whom the exchange deal is being transacted.

Countervalue - Where a person buys a currency against the dollar it is the dollar value of the transaction.

Country risk - The risk attached to a borrower by virtue of its location in a particular country. This involves examination of economic, political and geographical factors. Various organisations generate country risk tables.

Cover - (1) To take out a forward foreign exchange contract. (2) To close out a short position by buying currency or securities which have been sold.

Covered Arbitrage - Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.

Covered Margin - The interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover.

Crawling peg - A method of exchange rate adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line with certain economic or market indicators.

Credit Risk - The risk that a debtor will not repay; more specifically the risk that the counterparty does not have the currency promised to be delivered.

Cross deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.

Cross rates - Rates between two currencies, neither of which is the US Dollar.

Current Account - The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.