Forex Investment and Currency Trading

Yield curve is used to analyze maturity risk in the credit markets. It applies to any fixed income market that has a series of maturities, such as an individual county’s debt or a series of expiration months for interest rate futures.
Yield curves are plotted for a given day or series of days.
Yield curves provide graphic representation of the maturity risk in a given market. Along with displaying a risk/reward curve for investors, it can also help identify unusual economic conditions for the issuer such as a liquidity crisis or recession.
A normal yield curve shows yields rising as maturities increase. This [...]

[Read more →]

Both FAS 133 and IAS 39 are based on common principles.
These include:

Derivatives should be recorded on the balance sheet as either assets or liabilities
The appropriate value for derivatives is their fair value
Changes in fair value of derivatives should be recorded directly in earnings each period unless special “hedge accounting” is applied
Special hedge accounting treatment should be limited

What does this mean?

For countries that have yet to adopt International Financial Reporting Standards (IFRS) and are currently accounting for derivatives off-balance sheet, adopting IAS 39 will create greater transparency
If certain types of hedging relationships or hedging instruments do not qualify for special hedge [...]

[Read more →]

Hedge funds are a type of leveraged fund, which refers to any number of different forms of speculative asset management funds that borrow money for speculation based on real assets under management. For instance, a hedge fund with $100 million under management can leverage those assets (through margin agreements with their trading counterparties) to give them trading limits of anywhere from $500 million to $2 billion. Hedge funds are subject to the same type of margin requirements as you or we are, just with a whole lot more zeroes involved.
The other main type of leveraged fund is known as a [...]

[Read more →]

A Multicallable Swap is a combination of vanilla swap and a Bermudan Swaption (described below). A liability manager will pay fixed on the swap and sell the Bermudan Swaption to lower the fixed rate. An investor will receive fixed on the swap and sell the Bermudan to raise the fixed rate.
When combined with a Swap, the Bermudan Swaption gives the counterparty (the floating rate receiver) the right to terminate the structure on a number of agreed future dates.
A Bermudan Swaption itself is an interest rate option where the buyer has the right but not the obligation to enter into an [...]

[Read more →]

Leverage allows an investor to use an amount of money to raise a far larger quantity. Therefore, it should not be taken lightly. In Forex, leverage can transform $1,000 into $100,000 on the markets. The initial amount of money, called a margin, allows the investor to leverage a much larger investment.
This means that even the smallest investor can suddenly command large positions in the Forex market. Leverage, however, can be extremely dangerous. Just as it allows investors to realize much larger gains over a very short time, it can also lead to staggering losses.
For example, you can buy currency on [...]

[Read more →]