CHAPTER 12 Basics of Foreign Exchange Markets Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Special! Get a Big Mac, Fries, and the Beverage of Your Choice for Only $7,200 Source: McDonald’s Bogota´, Colombia, the above information was accessed at http://www.mcdonalds com.co/promocion.php on January 19, 2006; this URL may no longer be active or may now include revised information Similar offers can be found at: http://www.mcdonalds.com.co/novedades.html Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-1 Correct Alignment of Exchange Rate and Price Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-2 Incorrect Alignment of Exchange Rate and Price Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-3 Foreign Exchange Quotations Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-4 Bid-Ask Quotes for Dollar per Ringgit and Ringgits per Dollar Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-5 Global Foreign Exchange Market Turnover* Source: Bank for International Settlements, Monetary and Economic Department, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004: Preliminary Global Results, September 2004, Table 1, p See http://www.bis.org/publ/rpfx04.pdf (accessed October 13, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-6 Currency Distribution of Reported Foreign Exchange Market Turnover Source: Bank for International Settlements, Monetary and Economic Department, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004: Preliminary Global Results, September 2004, Table 3, p 11 See http://www.bis.org/publ/rpfx04.pdf (accessed October 13, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-7 The Foreign Exchange Market Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-8 Checking Accounts Never Leave the Country Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit M12-1 Balance Sheet Changes in U.S and U.K Banks Due to the Creation of a Eurodollar Deposit Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-9 Foreign Exchange Quotes for Wednesday, January 18, 2006, and Thursday, January 19, 2006, from the January 20, 2006, edition of The Wall Street Journal Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-9 Continued Source: International Monetary Fund a—Russian Central Bank rate, b—Government rate, d—Rebased as of Jan 1, 2005 y—Floating rate Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-10 Swiss Franc–U.S Dollar Spot and Forward Rates Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-11 Japanese Yen–U.S Dollar Spot and Forward Rates Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-12 U.K Pound–U.S Dollar Spot and Forward Rates Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12-13 Swiss Franc–U.S Dollar Spot and Forward Rates Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A12-1 Differences between the Forward and Futures Markets Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit A12-2 Global Over-the-Counter Options Turnover Source: Bank for International Settlements, Monetary and Economic Department, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004: Preliminary Global Results, September 2004, Table 6, ‘‘Global OTC Derivatives Market Turnover by Instrument,’’ p 14 See http://www.bis.org/publ/rpfx04.pdf (accessed October 13, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved  ... South-Western, a part of Cengage Learning All rights reserved Exhibit 12- 4 Bid-Ask Quotes for Dollar per Ringgit and Ringgits per Dollar Copyright© 2008 South-Western, a part of Cengage Learning All rights... The Wall Street Journal Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12- 9 Continued Source: International Monetary Fund a Russian Central Bank rate,... b—Government rate, d—Rebased as of Jan 1, 2005 y—Floating rate Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 12- 10 Swiss Franc–U.S Dollar Spot and Forward Rates