The volume of the transaction (how much currency is being bought or sold).
Glossary of key terms
The date on which the spot contract is settled, i.e. when the currency amount is delivered. Settlement of a spot contract usually occurs within 2 working days after the trade is executed, for some currency pairs it is the next working day.
The two currencies involved in the exchange, where the value of one currency is quoted against the other.
Forward points represent the difference in price or the time value adjustment between the spot rate at execution and the rate at the settlement date. Forward Points are added to or subtracted from the spot rate to determine the forward rate of a particular settlement date, and are typically depicted in pips (percentage in points). This adjustment is determined by interest rate differentials and other transaction costs.
The length of time between execution and the expiry date.
An FX line allowing the company the right to buy or sell currency for a date in the future without immediate settlement of the full amount. An FX line will be tailored to the specific requirement of the business and will be approved on a collateralised or uncollateralised basis dependent on financial analysis. Clients may be subject to pay variation margin should the mark to market valuation be outside of the agreed risk parameters.
Measuring the fair value of the contract based on the current market price.
Swap points represent the difference in price or the time value adjustment between near leg and far leg settlement date. Swap points are added to or subtracted from the near leg rate to determine the far leg rate of a particular settlement date, and are typically depicted in pips (percentage in points). This adjustment is determined by interest rate differentials and other transaction costs.
A currency that is not freely traded within the foreign exchange market, usually because of government restrictions
The exchange rate given by an agreed rate source at the agreed time on the fixing date
The specific price at which the holder of the option can exercise the option to buy or sell a currency
The date in which an options contract expires and the rights of the option may be exercised. An option can be structured as an American option (allows the holder to exercise the option anytime up to and including the expiry date) or a European option (allows the holder to exercise the option only on the expiration date).
The two currencies involved in the exchange, where the value of one currency is quoted against the other
The pre-determined proportion of the notional in which participation in favourable market moves is permitted as per the contract
