2. What is the difference between the retail or client market and the wholesale or interbank market for foreign exchange?
3. Who are the market participants in the foreign exchange market?
5. What is meant by a currency trading at a discount or at a premium in the forward market?
6. Why does most interbank currency trading worldwide involve the U.S. dollar?
7. Banks find it necessary to accommodate their clients’ needs to buy or sell FX forward, in many instances for hedging purposes. How can the bank eliminate the currency exposure it has created for itself by accommodating a client’s forward transaction?
8. A CD/$ bank trader is currently quoting a small figure bid-ask of 35-40, when the rest of the market is trading at CD1.3436-CD1.3441. What is implied about the trader’s beliefs by his prices?
9. What is triangular arbitrage? What is a condition that will give rise to a triangular arbitrage opportunity?
1. Using the American term quotes from Exhibit 5...