Forex Glossary

Aggregate

The total amount of exposure a bank has to forex and forward contracts from a single customer.

Aggressor

Trader who is dealing in the market with an existing price.

American Option

Option that can be used during any valid business date during the option’s lifetime.

Appreciation

This is where a currency strengthens due to market demand and not in response to actual market behavior.

Arbitrage

A low risk category of trading that involves making profits from the differences in the price of a single currency pair which is traded in two different markets.

Around

Jargon used by dealers in a situation where the forward premium/discount is near the level of parity.

Asian Option

An option which pays off over time in accordance to the average prices of the underlying asset.

Ask Price

The ask price or offer price is the price which sellers are prepared to sell a currency pair.

Asset

In the foreign exchange market it is an item with a specific value.

Asset Allocation

An investment practice where funds are allocated amongst different markets to produce variation for reasons of risk management or expected returns that are constant with the aims of an investor.

At Best

Instruction provided to a dealer to either buy or sell at the best current market rate.

At or Better

A specific order to deal at a particular rate or better.

At-the-Money

Where an option expires at the same level as the strike (purchasing) price.

At Par Forward Spread

Where the spot price is the same as the forward price.

Auction

Commonly used in the foreign exchange market, where the selling of a note is done to the highest bidder. It is commonly used for allocation government bills/paper, such as US Treasury Bills. Both small and large investors have access to the bills. Government auctions are commonplace nowadays.

AUD/USD

Abbreviation used to describe the Australian Dollar and US Dollar (AUD/USD). The currency pair is read as how many US Dollars are required to purchase one Australian Dollar.

Aussie

Slang used by dealers for the AUD/USD currency pair.

Average Rate Option

A particular contract (also known as an Asian option) in which the exercise price is based on the differentiation between the average spot rate and strike (purchase) price over the life of the contract.