Vocabulary list

A. foreign exchange market валютный рынок

legal tender законное платежное средство

national boundaries государственные границы

beyond prep за пределами

monies n pl денежные суммы

interchangeable adj взаимозаменяемый, обмениваемый

exchange v обмениваться); n обмен

rate of exchange обменный курс

unit of currency денежная единица

enable v позволять, давать возможность

currency mix структура денежной массы

occur v происходить

interbank market межбанковский рынок

foreign exchange department валютный отдел

spot market наличный рынок

forward market форвардный рынок

futures market фьючерский рынок

currency options market рынок валютных опционов

call for v (зд.) требовать, предусматривать

remainder n оставшаяся часть, остаток

outright adj (зд.) обычный

swap n своп

volatility n изменчивость, непостоянство

bid-ask (bid-offer) spread разница между ценами (курсами) продавца и покупателя

currency arbitrage валютный арбитраж

reliance n доверие, уверенность

clearing n (зд.) сравнение деталей финансовой сделки перед расчетом

robustness n прочность

B. Dialogue cornerstone of the global financial market

Russian: As far as we know, the cornerstone of the global financial market is the Foreign Exchange Market. In this connection, how is it developing? What affects its development?

Foreigner. I would stress, first of all, that the FOREX is really an integral, fundamental sector of the global financial market. It reflects economic relations between parties to currency deals. The most noticeable factors affecting the market are trade and non-trading financial transactions between countries, like transportation, insurance, tourism, credits, foreign investment, etc.

R.: The market has no one centralized location, does it?

F.: No, the market is global in character. It is rather a network of dealing rooms connected by sophisticated communications systems, like telephones, telex machines and electronic dealing systems. Major trading activities are conducted in London, New York, Chicago, Tokyo, Singapore and others.

R.: The cities you've mentioned are located in different time zones. What are the trading hours then?

F.: Oh, trading occurs 24 hours a day. Dealing rooms span the globe and the market never really closes.

R.: How big is the market? How big is the volume of deals in the market?

F.: By the estimate of the Bank for International Settlements, about $1 trillion is exchanged every day.

R.: Who are the major participants in the market?

F.: Commercial and investment banks, central banks, governmental agencies, professional fund managers, corporations, brokers, investors, speculators.

R.: I think banks play the most important role in currency transactions.

F.: You are right. Bank dealers at their workplaces are in constant contact by telephones or computers with dealers in different banks. They sit analysing latest currency quotations they see on display. Banks buy or sell currency either for themselves or on behalf of their clients.

R.: What currencies can be bought and sold?

F.: Only convertible currencies.

R.: I know that currency operations are based on exchange rates. The exchange rate is the value of one unit of the foreign currency expressed in the other currency concerned. Banks involved in currency operations determine full quotations including the buying and selling rates and use them for their currency transactions. How are exchange rates determined?

F.: It's a very difficult question. Determination of the exchange rate at which foreign transactions will take place depends on the exchange rate policy adopted by the central bank of a country. At the present time countries are free to choose the method to determine the value of their currencies. Advanced industrial countries use floating rates depending on supply and demand. Other countries peg their currencies to one currency or a group of currencies.

R.: What factors affect the exchange rate?

F.: They are many. The exchange rate depends first of all on the Purchasing Power Parity, country's economic development, balance-of-payments position, inflation rate, money in circulation, confidence in the national currency on the world market, interest rates, the central bank policy, currency legislation, etc.

R.: The Central Bank of Russia is taking steps to liberalize currency legislation and to join the global financial community.

B. cornerstone краеугольный камень

integral adj неотъемлемый

currency deal валютная сделка

dealing room дилерская комната

time zone часовой пояс

span v охватывать, перекрывать

latest currency quotations последние валютные котировки

convertible currency конвертируемая валюта

buying (selling) rate курс покупки (продажи)

value of currency стоимость валюты

floating rate плавающий курс

peg v «привязывать» (валютный курс)

purchasing power parity паритет покупательной силы валют

Words you may need:

band n (зд.) полоса, диапазон

breakdown n (зд.) падение, развал

multilateral adjustments многосторонние корректировки

abandon v отказываться (от чего-л.)

Words you may need:

web n паутина

regulatory environment правовое поле

fundamentals n pl основы

drive v приводить в движение

derivative instruments производные инструменты

Eurocurrency market евровалютный рынок

credit facilities кредиты, источники кредитования

core n сердцевина, ядро

positioning n установление позиции

hedging n хеджирование

claim n требование

primary securities первичные ценные бумаги

Euronote n евронота (1-6 – месячный вексель)

sample v отбирать (образцы)

reference banks банки, чьи процентные ставки используются при расчете ЛИБОР и др. ставок-ориентиров

London interbank bid rate (LIBID) ставка покупателя на лондонском межбанковском рынке депозитов (ЛИБИД)

London interbank offered rate (LIBOR) ставка продавца (предложения) на лондонском межбанковском рынке депозитов (ЛИБОР)

debt security ценная бумага, представляющая собой долговое свидетельство

long-standing adj давнишний, давний

trade financing финансирование торговли

merchandise n товары

foreign-based adj расположенный за рубежом

revolving credit facilities револьверный кредит

term loan срочная ссуда

project financing финансирование проектов

secured credit ломбардный кредит (кредит под обеспечение легко реализуемыми ценными бумагами)

commercial paper «коммерческие бумаги», векселя

Words you may needs:

to manage the risk управлять риском

rampant adj безудержный, быстро расширяющийся

over time со временем

interest-bearing securities процентные ценные бумаги

mature v подлежать оплате, подлежать погашению

hedge (against) v хеджировать

Words you may need:

via через, посредством

to take position устанавливать позицию

at times по временам, время от времени

bypass v обходить

credit squeeze «сжатие кредита» (мероприятия государства по ограничению кредита потребителям)

Tougher Measures Needed to Counter Macroeconomic Effects of Money Laundering

The globalization of the world economy and the growing efficiency of capital markets allow individuals and firms to shift vast amounts of money relatively freely between domestic financial markets and from one country to another. The efficiency of capital markets and their freedom from restrictions on capital movements have also provided criminal elements with an easy means to launder internationally money acquired from illegal activities in particular countries. Although difficult to measure, the magnitude of the sums involved and the extent of the criminal activities that generate this "income" have implications for both the domestic and the international allocation of resources and macroeconomic stability.

Money laundering and measures to counter it have therefore become the focus of intense international attention in recent years.

Money laundering is, by definition, a concealed activity. The-"dirty" money that is cycled through the international capital "laundromats" is generated by criminal activities that take place far from the eyes of the authorities. These activities include, in particular, the production and distribution of illegal drugs, as well as theft and embezzlement, insider trading, traffic in nuclear materials, usury, and prostitution. Although it is impossible to measure directly the size of the net financial gains that accrue annually to those who engage in these activities worldwide, the value of the total stock of laundered money is probably much larger than the GDP of many countries.

The concentration of vast sums of money in laundering operations has generated progressively more sophisticated attempts to launder the assets. Laundering transactions now involve a broad range of financial instruments, including derivatives. And the intermediaries have increasingly included such traditional financial institutions as banks and near-banks, brokers and dealers in securities, and foreign exchange dealers, as well as unconventional and parallel financial markets.

This huge money stream may exert an impact on macroeconomy.

At the national level, large financial flows related to money laundering could influence variables such as exchange rates and interest rates. At the international level, capital movements originating in one center can easily spread to others, thus transforming a national problem into a systemic one.

The transparency and soundness of financial markets are key elements in the effective functioning of economies, and money laundering can threaten both. Criminally obtained money can corrupt financial market officials, and the damage can be long-lasting, because the credibility of markets, though quickly lost, takes a long time to be rebuilt.

Although domestic money laundering can often be fought at the national level, an effective solution to the international money laundering problem is only possible at the international level.

Words you may need:

money laundering отмывание денег

counter v противостоять

magnitude n размер(ы), масштаб(ы)

implication n подтекст, смысл

concealed activity тайная деятельность

drugs n наркотики

theft n кража

embezzlement n растрата

traffic (in) (зд.) торговля (чём-л.)

usury n ростовщичество

accrue v увеличиваться, расти, (зд.) поступать

derivatives n pl производные ценные бумаги

to exert an impact оказывать воздействие

Russian: I know that starting from January 1999, the new European currency-the Euro-has been traded in the foreign exchange markets. How will the introduction of the Euro affect the European Union countries?

Foreigner: First of all it is an important step towards European integration. European countries have already set up the EU Council, the European Parliament and the European Central Bank.

R.: How will the monetary policy of the EU be regulated?

F.: By the European Central Bank and its system. It will be using usual financial instruments: interest rates, open-market operations, reserve requirements, etc.

R.: Who will benefit from the Euro?

F.: We all, particularly our business. Business firms will get wider possibilities, first of all, in the money and capital markets. Frontiers are being eliminated, business is becoming international.

R.: As far as I know, some countries of Europe failed to enter the Euro zone, didn't they?

F.: To be exact, the UK and Switzerland refused to enter the Euro system. Others simply failed to comply with some economic and legal requirements.

R.: At the moment the Euro is used in parallel with the currencies tied to it and only for non-cash payments. When will the cash Euro be introduced?

F.: Starting with July 1, 2002, when the national currencies will cease to exist.

R.: I foresee a serious problem here. As soon as the currency issuance and monetary policy become the function of the European Central Bank, the countries will lose their independence.

F.: Yes, it is a serious drawback. But the economic benefits will outweigh it.

Foreign Exchange Swaps

Swaps are transactions in which two parties swap financial assets by linking a foreign exchange transaction in cash to an opposite futures business in the same currency.

Foreign Exchange Swap Markets have developed since the early 1980s. The oldest type of swap is the conventional foreign exchange deal whereby one currency is simultaneously bought spot and sold forward against another – meaning an immediate exchange of cash followed by a further reverse exchange at a specified date in the future.

The idea of swapping has now spread further. By far the largest business volume amongst swaps occurs in the so-called "vanilla interest rate swap". A "plain vanilla", or fixed-to-fixed foreign exchange, or currency swap is an exchange of the principal and interest payments associated with a fixed-rate loan in one currency for the principal and interest payments on a similar loan in a second currency. The first such swap between IBM and the World Bank was done in 1981. Since then the swap market has grown to over $ 1 billion and, in the process, has evolved several additional types of currency swaps.

Words you may need:

Foreign Exchange Swap валютный «своп»

to buy spot купить на условиях «спот»

followed by за которым следует ...

vanilla interest rate swap «своп» процентный

plain vanilla простой процентный «своп»

evolve v развиваться, эволюционировать

Foreign Exchange Options

Options as a financial instrument have a reasonably short history in financial markets, with the first option contracts being traded in Chicago in 1973. In foreign exchange, a call option on the US dollar is the right to buy the US dollar, and a put option is the right to sell the US dollar. To purchase an option, the buyer has to pay a premium. To write an option, the seller receives a premium.

There are three different types of users of foreign exchange options: the corporate treasury, the fund manager, and the commercial bank trading room. For example, in the currency option markets, the corporate treasury can buy the right, but not the obligation, to sell or buy currency forward, if required. This option, to decide whether to buy or sell currency, is particularly important when the firm is unsure about the timing or size of foreign currency receipts or payment.

International banks, hi their turn, use currency options for their customers and for their own trading. In the past few years, nearly all dealing rooms have seen a large growth in the use of currency options and banks have started employing traders purely to trade currency options for the bank's own account.

Options are also sold "over the counter" (OTC) in a manner similar to currency forward contracts. OTC contracts have very flexible terms arranged by negotiation between the (normal bank) supplier and corporate buyer. Thus the currencies to be bought and sold can vary according to the corporate customer's needs and do not have to correspond to exchange market conventions. Amounts, duration of the option, and price can all be negotiated and matched to the corporate customers' exposure.

The volume of trading on the OTC market between banks is even higher than on the listed options market. There is no public secondary market in OTC currency options but trading is conducted by telephone using prices available on screen systems provided by large international (commercial and investment) banks. MNCs are major users of OTC options and are key participants in the screen markets. These OTC markets are closely linked to spot and forward markets in currency in which the banks and MNCs also play central roles.

The organised currency option exchanges provide an important public pricing mechanism for the MNC treasurer and may also provide a suitable currency option contract for foreign cash flows of known size but uncertain likelihood of occurrence.

The price of a foreign exchange option depends on: the length of a period desired to be covered by the option; the underlying volatility of the foreign exchange market; the relationship between the spot exchange rate and the desired price or the desired strike price; option premium; foreign interest rate.

Moreover, the type of currency option that financial institutions, corporations and the like can trade in vary from the extremely simple to the very sophisticated. It is possible to design tailor-made foreign exchange options to suit requirements, as essentially a foreign exchange option is akin to an insurance premium on the foreign exchange market. All this makes this instrument very attractive.

Within the past fifteen years the use of options has grown in all financial markets. It seems quite likely that foreign exchange options will grow further in coming years.

Words you may need:

call option опцион «колл»

put option опцион «пут»

to write an option исполнить опцион

corporate treasury подразделение в корпорации, занимающееся управлением ее свободными средствами

to sell (buy) forward продать (купить) на срок

convention и конвенция, соглашение

strike price цена исполнения

and the like и тому подобное

tailor-made adj с учетом потребностей заказчика

to be akin (to) быть сродни, быть близким (чему-л.)