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The Foreign Exchange Matrix: A new framework for understanding currency movements by Barbara Rockefeller, Vicki Schmelzer

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Chapter 2 – Review of Risks

“If this were a logical world, men would ride sidesaddle.”

Ron Frost, Agricultural Markets Manager, Chicago Mercantile Exchange

Markets are increasingly global in scope, so that a Mumbai investor can trade a US equity issue or the euro/dollar exchange rate with equal ease of execution (although we may question whether he should). A symptom of this globalisation is that global financial markets move together in a way that they did not before; events in one market have repercussions for others.

There are many risk indicators that players watch to try to help them understand the risk that movements in one market will affect another they are interested in, but we do not yet have a single risk index to explain market ...

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