Cable A term used in the foreign exchange market for the US
Dollar/British Pound rate.
Cable Transfer Telegraphic transfer of funds from one centre to another.
Now synonymous with interbank electronic fund transfer.
An option position comprising the purchase and sale of two
option contracts of the same type with different expiration
dates at the same exercise price.
An option that gives the holder the right to buy the
underlying instrument at a specified price during a fixed
Call Option A call option confers the right but not the obligation to buy
stock, shares or futures at a specified price.
Cambiste French term for foreign exchange dealer.
Capital Account Juxtaposition of the long and short term capital imports and
exports of a country.
Carry The interest cost of financing securities or other financial
A finance charge associated with the storing of commodities
(or foreign exchange contracts) from one delivery date to
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Normally refers to an exchange transaction contracted for
settlement on the day the deal is struck. This term is mainly
used in the North American markets and those countries
that rely on these markets for foreign exchange services
because of time zone preferences i.e. Latin America. In
Europe and Asia, cash transactions are often referred to as
"value same day" deals.
Cash and Carry
The buying of an asset today and selling of a future contract
on the asset. A reverse cash and carry is possible by selling
an asset and buying a future.
Cash Delivery Same day settlement.
A procedure for settling futures contract where the cash
difference between the future and the market price is paid
instead of physical delivery.
CBOE Chicago Board Options Exchange.
CBOT or CBT Chicago Board of Trade.
CD Certificate of Deposit.
A central bank provides financial and banking services for a
country's government and commercial banks. It implements
the government's monetary policy as well by changing
interest rates. It is normally the issuing bank and controls
bank licensing, and any foreign exchange control regime.
Exchange rates against the ECU adopted for each currency
within the EMS. Currencies have limited movement from the
central rate according to the relevant band.
Certificate of Deposit (CD)
A negotiable certificate in bearer form issued by a
commercial bank as evidence of a deposit with that bank
which states the maturity value, maturity rate and interest
rate payable. CDs vary in size with maturities ranging from
a few weeks to several years. CDs may normally be
redeemed before maturity only by sale on the secondary
market, but may also be redeemed back to issuing bank
through payment of a penalty.
The Commodity Futures Trading Commission, the US Federal
regulatory agency for futures traded on commodity
markets, including financial futures.
CHAPS Clearing House Automated Payment System.
An individual who studies graphs and charts of historic data
to find trends and predict trend reversals. These include
the observance of certain patterns and characteristics of
the charts to derive resistance levels, head and shoulders
patterns, and double bottom or double top patterns which
are thought to indicate trend reversals.
The New York clearing house clearing system. (Clearing
House Interbank Payment System). Most euro transactions
are cleared and settled through this system.
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Copenhagen Interbank Rate, the rate at which the banks
lend the Danish Krone on an unsecured basis. The rate is
calculated daily by the Denmark's Nationalbank (the Danish
Central Bank), based on rules set out by the Danish Banker's
The process of setting a number of items against one
another and making fund transfers only on the net balance
as part of the settlement process.
A transaction which leaves the trade with a zero net
commitment to the market with respect to a particular
The purchase of an option identical to one already sold to
liquidate a position.
CME Chicago Mercantile Exchange Cock Dates (see broken dates).
Coincident Indicator An economic indicator that generally moves in line with the
general business cycle such as industrial production.
Comex Commodity Exchange of New York.
Commission The fee that a broker may charge clients for dealing on
Compound Option An option on an option, the dates and price of such option
Comptant French term for spot settlement in foreign exchange.
Confirmation A memorandum to the other party describing all the
relevant details of the transaction.
Consumer Price Index
Monthly measure of the change in the prices of a defined
basket of consumer goods including food, clothing, and
transport. Countries vary in their approach to rents and
mortgages. Rising CPI is normally associated with
expectations of higher short term interest rates and may
therefore be supportive for a currency in the short term.
Nevertheless, a longer term inflation problem will
eventually undermine confidence in the currency and
weakness will follow.
An agreement to buy or sell a specified amount of a
particular currency or option during a specified month in
the future (See Futures contract).
Contract Expiration Date
The date on which a currency must be delivered to fulfill
the terms of the contract. For options, the last day on
which the option holder can exercise his right to buy or sell
the underlying instrument or currency.
The month in which a futures contract matures or becomes
deliverable if not liquidated or traded out before the date
The bank that regularly performs services on behalf of a
foreign bank that has no branch in the relevant centre, e.g.
to facilitate the transfer of funds. In the US, this often
occurs domestically due to interstate banking restrictions.
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Cost of Carry
The interest rate parity, where the forward price is
determined by the cost of borrowing money in order to hold
Cost of Living Index Broadly equivalent to Retail Price Index or Consumer price.
Counter Value Where a person buys a currency against the dollar, it is the
dollar value of the transaction.
Counterparty The other side to a deal (customer, or bank) with which a
foreign exchange deal is executed.
Foreign Currency Inter-bank Exchange (FOREX) instruments
are Positions (Buy and/or Sell) between the Client and its
Counterparty and, unlike exchange-traded foreign exchange
instruments which are, in effect, guaranteed by a clearing
organization affiliated with the exchange on which the
instruments are traded, are not guaranteed by a clearing
organization. Thus, when the Customer purchases an OTC
foreign exchange instrument, it relies on the Counterparty
from which it has purchased the instrument to fulfill the
contract. Failure of a Counterparty to fulfill a Position could
result in losses of any prior payment made pursuant to the
Positions, as well as the loss of the expected benefit of the
Factors that affect currency trading unique to the specific
country including political, regulatory, legal and holiday
(1) On bearer stocks, the detachable part of the hide behind
nominee status. Certificate exchangeable for dividends. (2)
Denotes the rate of interest on a fixed interest security.
Coupon Value The annual rate of interest of a bond.
Cours du Change (French) Exchange rate.
Cours Libre (French) Free exchange rate.
Cours Officiel (French) Official exchange rate.
Court French for "short" as in "une position courte".
Courtier (French) Broker.
(1) To take out a forward foreign exchange contract. (2) To
close out a short position by buying currency or securities
which have been sold.
Covered Call A term used in the foreign exchange market for the US
Dollar/British Pound rate.
Covered Call Write
A strategy of writing call options against a long position in
the underlying asset. A covered put write being based on a
short position in the asset.
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Covered Interest Rate
An arbitrage approach which consists of borrowing currency
A, exchanging it for currency B, investing currency B for the
duration of the loan, and, after taking off the forward cover
on maturity, showing a profit on the entire set of deals. It is
based on the theorem of interest rate parity (one of the key
theoretical economic relationships), which says that the
return on a hedged foreign investment will just equal the
domestic interest rate on investments of identical risk.
When the covered interest rate differential between the
two money markets is zero, there is no arbitrage incentive
to move funds from one market to another.
The interest rate margin between two instruments
denominated in different currencies after taking into
account of the cost of forward cover.
Consumer Price Index. Monthly measure of the change in
the prices of a defined basket of consumer goods including
food, clothing, and transport. Countries vary in their
approach to rents and mortgages.
CPSS Committee on Payment and Settlement Systems.
Crawling Peg (Adjustable
An exchange rate system where a country's exchange rate is
"pegged" (i.e. fixed) in relation to another currency. The
official rate may be changed from time to time.
Credit Lombard See Lombard rate.
The risk that a debtor will not repay; more specifically the
risk that the counterparty does not have the currency
promised for delivery.
Cross Deal A foreign exchange deal entered into involving two
currencies, neither of which is the base currency.
A technique using financial futures to hedge different but
related cash instruments based on the view that the price
movements between the instruments move in concert.
An exchange rate between two currencies, usually
constructed from the individual exchange rates of the two
currencies, as most currencies are quoted against the
Crossed Market The situation which exists when a broker's bid is higher than
the lowest offer of another broker.
A cross-trade transaction is a transaction in which either the
buy-broker and the sell-broker are the same, or the buybroker
and the sell-broker belong to the same firm.
The type of money that a country uses. It can be traded for
other currencies on the foreign exchange market, so each
currency has a value relative to another.
Various weightings of other currencies grouped together in
relation to a basket currency (e.g. ECU or SDR). Sometimes
used by currencies to fix their rate, often on a trade
Currency Swaps See swaps.
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The net balance of a country's international payments
arising from exports and imports together with unilateral
transfers such as aid and migrant remittances. It excludes
The value of all exports (goods plus services), less all
imports of a country over a specific period of time, equal to
the sum of trade and invisible balances plus net receipts of
interest, profits and dividends from abroad.
Cycle The set of expiration dates applicable to different classes of