EURO.uz -The Forex quick guide for beginners and private traders

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The Forex quick guide for beginners and private traders


Ultimo Continental term for month or year end.

Uncovered Another term for an open position.

Under Reference (Order)

Before finalizing a transaction all the details should be

submitted for approval to the order giver, who has the right

to turn down the proposal.

Under-Valuation An exchange rate is normally considered to be undervalued

when it is below its purchasing power parity.

Undo

A colloquial term for reversing a transaction. e.g. a spot

sale by means of a forward purchase or, if done in error, a

spot purchase.

Unit of Account A device designed to provide a consistent value with varying

currencies. e.g. ECU and SDR.

Up Tick A transaction executed at a price greater than the previous

transaction.

Valeur Compensee

(French) Payments are said to be "valeur compensee" when

payment by one party in one centre, and settlement by the

other party in another centre, takes place on the same day.

Value Date

For exchange contracts, it is the day on which the two

contracting parties exchange the currencies which are being

bought or sold. For complete description see the chapter on

trading. For a spot transaction, it is two business banking

days forward in the country of the bank providing

quotations which determines the spot value date. The only

exception to this general rule is the spot day in the quoting

centre coinciding with a banking holiday in the country(ies)

of the foreign currency(ies). The value date then moves

forward a day. The enquirer is the party who must make

sure that the spot day coincides with the one applied by the

respondent. The forward months maturity must fall on the

corresponding date in the relevant calendar month. If the

one month date falls on a non-banking day in one of the

centers, then the operative date would be the next business

day that is common. The adjustment of the maturity for a

particular month does not affect the other maturities that

will continue to fall on the original corresponding date if

they meet the open day requirement. If the last spot date

falls on the last business day of a month, the forward dates

will match this date by also falling due on the last business

day. Also referred to as maturity date.

page 107 of 110

Value Definition

Value Spot Normally settlement for two working days from the date the

contract is entered into.

Value Today Transaction executed for same day settlement; sometimes

also referred to as "cash transaction"

Vanilla

A simple option whose terms and conditions do not include

any provisions other than exercise style, expiry and strike.

To compare with exotic options which have additional

terms.

Variation Margin

Funds required to be deposited by a client when a price

movement has caused funds to fall below the stipulated

percentage of the value of the contract.

Vega Expresses the price change of an option for a one per cent

change in the implied volatility.

Velocity of Money

The speed with which money circulates, or turnover in the

economy. It is calculated as the annual national income;

average money stock in the period.

Vertical (Bear or Bull)

Spread

The sale of an option with a high exercise price and the

purchase (in the case of a bull), or the sale (in the case of a

bear), of an option with a lower exercise price. Both options

will have the same expiration date.

Volatility

A measure of the amount by which an asset price is

expected to fluctuate over a given period. Normally

measured by the annual standard deviation of daily price

changes (historic). Can be implied from futures pricing,

implied volatility.

Vostro Account

A local currency account maintained with a bank by another

bank. The term is normally applied to the counterparty's

account from which funds may be paid into or withdrawn as

a result of a transaction.

Wholesale Money Money borrowed in large amounts from banks and

institutions rather than from small investors.

Wholesale Price Index

Measures changes in prices in the manufacturing and

distribution sector of the economy, and tends to lead the

consumer price index by 60 to 90 days. The index is often

quoted separately for food and industrial products.

Working Balance Discretionary element in the monetary reserves of a central

bank.

Working day

A day on which the banks in a currency's principal financial

center are open for business. For FX transactions, a working

day only occurs if the banks in both currencies' financial

centers are open (all relevant currency centers in the case

of a cross).

World Bank

A bank made up of members of the IMF whose aim is to

assist in the development of member states by making loans

where private capital is not available.

Writer The seller of a position. Also known as the grantor of the

trade. "Writing a Currency" is to sell it.

Value Definition

Yard Slang for milliard, one thousand million (1 European milliard

= 1 US billion = 1,000 million).

Yield Curve

The graph showing changes in yield on instruments

depending on time to maturity. A system originally

developed in the bond markets is now broadly applied to

various financial futures. A positive sloping curve has lower

interest rates at the shorter maturities, and higher at the

longer maturities. A negative sloping curve has higher

interest rates at the shorter maturities.

Z-Certificate

Certificate issued by the Bank of England to "discount

houses" in lieu of stock certificates to facilitate their

dealing in the short dated gilt edge securities.

Zero Coupon Bond A bond that pays no interest. The bond is initially offered at

a discount to its redemption value.

 

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