Foreign Exchange Risk Mitigation Techniques/Foreign Exchange Trading

Unit 2.1- Foreign Exchange Risk Mitigation Techniques

Introduction | Rates of Exchange | Market Drivers | Measuring FX Exposure | Business Needs for Foreign Currency | Foreign Exchange Trading | Common Instruments to Offset Risk | Summary | Resources | Activities | Assessment Return to International Finance Module 2: Risk Mitigation Techniques

Foreign Exchange Trading

The exchange of one currency for another currency, dollars (USD) for Japanese yen (JPY), is the basic definition of foreign exchange. There are two different types of quotations:

• Indirect quotation - The price of a national currency expressed in terms of one unit of a foreign currency
• Quoting Japanese yen at a rate of 110
• 1 USD = 110.00 JPY
• Direct quotation - The value of one unit of national currency in terms of the foreign currency
• Quoting USD at a rate of .009091
• 1 JPY = .009091 USD.

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