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The Foreign Exchange Market And Parity Conditions

In: GLOBAL CORPORATE FINANCE A Focused Approach

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  • Suk H. Kim

Abstract

The efficient operation of the international monetary system has necessitated the creation of an institutional structure, usually called the foreign exchange market. This is a market where one country’s currency can be exchanged for another country’s. Contrary to what the term might suggest, the foreign exchange market actually is not a geographic location. It is an informal network of telephone, telex, satellite, facsimile, and computer communications between banks, foreign exchange dealers, arbitrageurs, and speculators. The market operates simultaneously at three tiers:1. Individuals and corporations buy and sell foreign exchange through their commercial banks.2. Commercial banks trade in foreign exchange with other commercial banks in the same financial center.3. Commercial banks trade in foreign exchange with commercial banks in other financial centers.

Suggested Citation

  • Suk H. Kim, 2023. "The Foreign Exchange Market And Parity Conditions," World Scientific Book Chapters, in: GLOBAL CORPORATE FINANCE A Focused Approach, chapter 4, pages 77-109, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811281969_0004
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    More about this item

    Keywords

    Global Finance; International Finance; International Financial Management; International Accounting; International Business; International Business Finance; Foreign Trade; International Economics; Foreign Exchange; International Corporate Finance; Multinational Finance; International Taxation;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • F3 - International Economics - - International Finance
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F - International Economics

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