What are the characteristics of the spot market? What ...

[Medesa]

What are the characteristics of the spot market? What institutions handle spot exchanges?
 
  What will be an ideal response?

Question 2

Bilateral netting occurs when two subsidiaries net out their mutual invoices.
 
  Indicate whether the statement is true or false

[snackralk]

Answer to Question 1

Most foreign currency transactions take place between foreign-exchange traders, so the traders, who work for foreign-exchange brokerage houses or commercial banks, quote the rates. The traders always quote a bid and offer rate. The bid is the price at which the trader is willing to sell foreign currency. In the spot market, the spread is the difference between the bid and offer rates and is the trader's profit margin. The method of quoting exchange rates is called the direct quote, also known in the foreign-exchange industry as American terms. It represents a quote from the point of view of someone in the United States. The other convention for quoting foreign exchange is European terms, which means a direct quote from the perspective of someone in Europe. From a U.S. point of view, this means the number of units of the foreign currency per U.S. dollar. This is also sometimes called the indirect quote in the United States, although American terms and European terms are the most accurate way to describe the quotes.

Answer to Question 2

TRUE