Intl Economics – Chapter 11: Foreign Exchange



We consider both the forward market and futures market, two very related, but different terms, that you should understand and know how they differ. To find out …

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Intl Economics - Chapter 11: Foreign Exchange

We consider both the forward market and futures market, two very related, but different terms, that you should understand and know how they differ. To find out, we will explore the market for foreign currency options. The role of the International Monetary Market of the Chicago Mercantile Exchange is emphasized.
We will discover how the determination of the equilibrium rate of exchange in a free market is made, using the sources of demand for foreign exchange and supply of foreign exchange. We make a distinction between the exchange rate of one currency in terms of another currency and the resulting trade-weighted value, also called an effective exchange rate.