The foreign exchange market has two tiers: the interbank market and the client market

International Finance Management | BUS434 Assignment 1: Discussion—The Foreign Exchange Market

The foreign exchange market has two tiers: the interbank market and the client market. Explain how each market functions, how they differ, and the interrelationship of the two markets. Present one practical example for each case. Select any country and explain how the interbank market or the client market functions in that country.

Answer these questions in a short essay, 3–4 paragraphs in length, and post the essay in the Discussion Area. After you have posted your essay, read all of the essays by the other members of the class and comment on at least two other essays.

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Assignment 2: Valuation of Futures Contracts

Assume today’s settlement price on a CME Eurodollar futures contract is $1.3140/ED. You have a short position in one contract. Your performance bond account currently has a balance of $1,700. The next three days’ settlement prices are $1.3126, $1.3133, and $1.3049.

In a 3-4 page paper, calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day (show your calculations). How would your results change assuming you have a long position in the futures contract? Describe three factors that might affect the financial results of a firm conducting business internationally which could ultimately impact the performance bond account.

Use the following file naming convention: LastnameFirstInitial_M2_A2.doc.

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