Buy, Sell, Risk! Users of Foreign Exchange Markets
In This Chapter
Identifying the participants in foreign exchange markets
Understanding the risk of multinational companies
Understanding the risk of speculators
Diverse groups are involved in foreign exchange markets. This chapter identifies these groups, explains the nature of their involvement, and illustrates the risk associated with their involvement. Numerical examples guide you through the concepts and illustrate the risk taken by various participants in foreign exchange markets.
Identifying Major Actors in Foreign Exchange Markets
Multinational firms, speculators, and central banks are the important participants in foreign exchange markets. Multinational companies operate in different countries and, therefore, deal with a variety of currencies in their daily business. Speculators invest in assets denominated in different currencies and, therefore, buy or sell currencies. Central banks may be engaged in foreign exchange markets to increase or decrease the value of their currency with respect to other currencies.
The term multinational firm refers to a wide range of domestic firms that are engaged ...