Foreign Exchange A Practical Guide To The Fx Markets Pdf 2021 Page

Unlike stocks, FX is an market run by a global network of banks, brokers, and electronic trading platforms. The interbank market remains the core liquidity source.

| Instrument | Best For | 2021 Example | | :--- | :--- | :--- | | | Immediate settlement (T+2) | Buying EUR/USD at 1.1900 for a shipment due in 3 days. | | Outright Forward | Hedging future cash flows (no basis risk) | A US importer locking in USD/JPY for a 6-month electronics payment. | | FX Swap | Rolling positions or managing liquidity | Selling USD for EUR spot and buying back USD forward (the most traded instrument globally). | | Currency Swap | Long-term funding in foreign currency | A corporate issuing USD debt but needing EUR for operations. | | FX Option (Vanilla) | Hedging with upside participation | Buying a EUR/USD put option to protect a €10M receivable. | Unlike stocks, FX is an market run by