Chapter 5:

THE FOREIGN EXCHANGE

MARKET
 Chapter 5:
THE FOREIGN EXCHANGE MARKET

 The foreign exchange market ( FOREX )

 Operations on the foreign exchange market
 The foreign derivative operations
 The foreign exchange markets of developing countries
 FOREX’s operational management
 Research questions, discussion and exercises
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THE FOREIGN EXCHANGE MARKET

Overview of international financial markets

 Concept and roles of international financial market
 The subjects involved in the operation of
international financial markets
 Structure of international financial market
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THE FOREIGN EXCHANGE MARKET
The concept of international financial markets
 The place where buying and selling activities of
residential and non-residential funds
 The the place where trading activities of capital
between entities belonging to different economies
together and with the international financial
institutions
 The place where the exchange of capital flows on
an international scale
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The structure of international financial markets
 International Monetary Market - Forex Market:
The transfer of short-term funds with high
liquidity, which meet the demand of payment
capability
 International capital markets - bond market and
international stocks: meet the needs of
international investors different stakeholders
 Chapter 5:
THE FOREIGN EXCHANGE MARKET
The structure of international financial markets
Forex Market - Characteristics of international currency markets
International stock markets - Characteristic of the international
capital markets
Scope of the study:

- Distinguish short-term credit operations of the import and

export business as well as banking together with activities
on the foreign exchange market
- Some operational activities of medium and long-term
(developed projects and government debt, etc ...), direct
investment, indirect and international capital markets
 Chapter 5:
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Forex Market
 The concept of foreign exchange market
 The role of the foreign exchange market
 The structure of the foreign exchange market
 The entities involved in the operation of the foreign
exchange market
 Activities and business transactions on the foreign
exchange market
 Manage the activities of the foreign exchange market
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The concept of foreign exchange market

 Foreign currency and foreign exchange

 The concept of the foreign exchange market: is
the place where activities buying and selling
foreign currencies and foreign currency funds
 The essence of the foreign exchange market is the
international currency market
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The role of the foreign exchange market
 Transaction of demand and supply of foreign
currency to satisfy different needs of the foreign
currency to meet the demand for payment
capability, reduce risk in operations of foreign
currency exchange business
 The basis of formation and rating regulation

 Tools to control and regulate the movement of

short-term capital flows in foreign currencies
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The entities participating in
operation of the foreign exchange market
 The customers
 The intermediate financial exchanges, commercial
banks and financial institutions other
intermediaries
 The managing bodies of government
 The free broker
 Currency Speculators
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THE FOREIGN EXCHANGE MARKET
The structure of the foreign exchange market
 Based on the intervention of the State: the official
market and the none - official market - the trading
platform, the interbank markets and the invisible
market
 Based on the characteristics the transaction: Spot
market (Spot transactions) and the derivatives
market (Derivatives Markets).
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Activities and business transactions on

Spot foreign exchange market
 The operation of the foreign exchange market
1. Typical activities of the foreign exchange market
2. Some rules for the operation of the foreign exchange
 Business operations on the foreign exchange
market
1. The spot trading (Spot transactions)
2. The foreign exchange derivative transactions (Derivatives).
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THE FOREIGN EXCHANGE MARKET

Operations on the spot market

 Characteristics of the spot trading activities
 The transactions on the spot market
1. Spot trading activities

2. Controlled purchase operations

3. Ac-bit operations (Arbitrages)

4. Other business operations

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The foreign exchange derivative transactions

1. Trading operational contract by term (Forwards
Contracts)
2. Trading operational contract by future ( Futures
contracts)
3. Operation of currency swaps (Swaps)

4. Trading operational contract by options

( Options)
 Chapter 5:
THE FOREIGN EXCHANGE MARKET
European Currency Market
 European Currency Market (European Currencies):
Essentially the Forex market but including activities
of deposits and loans, thus forming mechanism of
money creation
 Established formation and development: formation of
Eurobanks and European Dollars
 The basic features:
 Always associated with large financial centers
 Floating rate and the most important basis is LIBOR
 Operates with the special advantages of the Eurobanks
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The foreign exchange market of developing

countries
 Overall characteristics of the foreign exchange
market of developing countries
 Some emerging market of foreign exchange
China's foreign exchange market
Russian foreign exchange market
Vietnam Foreign Exchange Market
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Manage the activities of the foreign exchange market

 Management purposes
 Managing bodies

 Managing objects

 Management methods
 Chapter 5:
THE FOREIGN EXCHANGE MARKET

Research questions, discussion and exercises

1. Forex Market: Concepts, structure, roles of participating

entities
2. The spot trading activities and foreign exchange derivative
transactions. The meaning of the research problem for the
management of the foreign exchange market in Vietnam
3. Foreign currency trading activities of Vietnamese
commercial banks
4. Managing the activities of the emering foreign exchange
market in the world and in Vietnam
5. Exercises on implementing business transactions in foreign
currency