Foreign Exchange Markets

Demetri Papacostas, Francesco Tonin

For those not involved in the FX market, it must be very difficult to get a palpable sense of what it is. Exchanging one currency for another happens when you go to the bank or the automated teller machine (ATM) and exchange money for your vacation; it happens on the second floor of some shopping mall in Singapore by some guy in a kiosk – no computer, and he makes a tighter price than JPMorgan; it happens on the fancier streets of Buenos Aires, where every five steps someone is yelling “cambio”; it happens when IBM sells its artificial intelligence (AI) services to a Chinese municipality; and it happens when the Federal Reserve Bank buys and sells currency to manipulate FX rates and implement interest rate policy.

FX is both omnipresent and a self-perpetuating creation. Although it permeates every aspect of global interactions, the heart of the system is really a market concentrated into a few major players, located in a few central locations and trading just a handful of currencies. In this chapter, we will explore who trades FX, where it happens, how big the market is, and look at just a few of the conventions and traditions. Some of these qualities have led to behaviour that

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: