Describe how organizations interact in the foreign exchange market. Include the advantages and disadvantages of conducting global business using the foreign exchange market. Use examples to help support your discussion.
**Please use Hill, C.W.L., (2015). Competing in the Global Marketplace 10th Ed. New York, NY: McGraw Hill Education: McGraw Hill; as primary reference.
SAMPLE SOLUTION
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Write My Essay For MeThe foreign exchange market is an international decentralized market where participants are able to buy, speculate, exchange, and sell currencies. The market is the largest financial market globally and it is made up of central banks, hedge funds, forex brokers, investment firms, commercial banks and companies (Hill, 2015). Apart from providing a unique floor for the buying and selling of currencies, FX also promotes currency conversion for global investments and trade. For example, it allows a business located in the USA to import processed and unprocessed goods from the European countries in Euros, even though its currency is USA dollars.
How Organizations Interact In the Foreign Exchange Market Financial instruments traded in these markets include spot, future, forward, swap, and option. Therefore, there are various forms of interactions that organizations may engage in including spot transactions, forward transactions, swap, or options (Hill, 2015). With spot transactions, two organizations agree on the exchange rate, therefore, the transactions are conducted at the agreed rate. In forward transactions, currency does not change hands until a future date. As a result, there is an agreement…
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