Kinds Of Conversion Operations Part 1

By in Intro to Forex on November 26, 2019

The concept of a kind of conversion operation on Forex closely intertwines with terminology of financial tools. On financial markets which besides Forex also concern a gold market, the credit market and the security market are understood as financial tools methods of realization of financial operations. Further exclusively financial tools concerning the international exchange market Forex will be considered.

Other financial markets and their financial tools fall outside the limits subjects of an information portal Forex won’t be considered further. Conversion operation is a transaction of participants Forex on an exchange of the stipulated sum of currency of one country for currency of other country for certain date under the established quotation. Conversion operations on Forex differ with value date, i.e. a delivery date of currency concerning date of the conclusion of the transaction of the purchase/sale of currency. On this sign conversion operations can be divided on two categories: operations of type a spot or current conversion operations; forward conversion operations.

The greatest volume of operations on Forex operations of this type is occupied by spot. Work on Forex on these operations is considered on an information portal Forex Arena. In the international practice it is accepted that value date of operations of type the spot is 2nd working day after the transaction conclusion.

Such conditions are convenient enough for counterparts (participants) of the transaction as within the current and next working day it is possible to process the necessary documentation and to arrange documents of payment. The market where the currency exchanges on flowing (spot) to quotations is called spot as the market is the spot market. It is necessary to make a reservation that such principle on operations of type a spot is fair only for large participants of the international exchange market.

For private investors (clients of retail broker houses), working on Forex through the Internet the transaction is made instantly on pressing of the button of the mouse. In such transactions value date loses the meaning – the client’s account always reflects a current condition of its work on Forex. To forward to conversion forward operations forwards, futures, options and swaps concern. They also are called derivative financial instruments (derivatives). Such financial tools have been specially developed for real business as they allow lowering possible risks from changes of quotations in the international exchange market in the future.

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