Financial term of the day, Saturday 19th of April 2014:

Base Currency

In terms of foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a given country. Examples: CHF/JPY, the Swiss franc is the base currency; EUR/USD, the EURO is the base currency.

Similar financial terms

Zero-base budgeting
The zero-base budgeting (ZBB) method disregards the previous year's budget in setting a new budget, since circumstances may have changed. Each and every expense must be justified in this system.

Base Currency
In terms of foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a given country. Examples: CHF/JPY, the Swiss franc is the base currency; EUR/USD, the EURO is the base currency.

Money base
Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.

Base probability of loss
The probability of not achieving a portfolio expected return.

Common-base-year analysis
The representing of accounting information over multiple years as percentages of amounts in an initial year.

Basel II (Basel Capital Accord)
Basel II - short for the new Basel Capital Accord - lays down new guidelines for determining the minimum solvency requirements for banks. The main change in these guidelines is a new system for weighting the risks run by banks in their loans to retail and corporate customers. The objective of Basel II is to improve the soundness of the financial system.

Basel Committee on Banking Supervision
A committee that meets under the auspices of the Bank for International Settlements in Basel, Switzerland to set bank regulatory standards.

Virtual currency option
An option contract introduced by the PHLX in 1994 that is settled in US$ rather than in the underlying currency. These options are also called 3-Ds (dollar denominated delivery).

Soft currency
A currency that is expected to drop in value relative to other currencies.

Reserve currency
A foreign currency held by a central bank or monetary authority for the purposes of exchange intervention and the settlement of inter-governmental claims.

Reporting currency
The currency in which the parent firm prepares its own financial statements; that is, US dollars for a US company.

Multicurrency loans
Give the borrower the possibility of drawing a loan in different currencies.

Multicurrency clause
Such a clause on a Euro loan permits the borrower to switch from one currency to another currency on a rollover date.

Xenocurrency
Xeno means foreign or strange. A Xenocurrency is one that trades outside its domestic boundaries.

Blocked currency
A currency that is not freely convertible to other currencies due to exchange controls.

Currency
Money.

Currency arbitrage
Taking advantage of divergences in exchange rates in different money markets by buying a currency in one market and selling it in another market.

Currency basket
The value of a portfolio of specific amounts of individual currencies, used as the basis for setting the market value of another currency. It is also referred to as a currency cocktail.

Currency future
A financial future contract for the delivery of a specified foreign currency.

Currency option
An option to buy or sell a foreign currency.

Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with the transaction. The arrangement involves a customized hedge contract embedded in the underlying transaction.

Currency selection
Asset allocation in which the investor chooses among investments denominated in different currencies.

Currency swap
An agreement to swap a series of specified payment obligations denominated in one currency for a series of specified payment obligations denominated in a different currency.

Eurocurrency
Certificates of Deposit (CDS), eurobonds, deposits, or any capital market instrument issued outside of the national boundaries of the currency in which the instrument is denominated (for example, Euro-Swiss francs, Euro-Deutsche marks, eurodollars, eurodollar bonds, or eurodollar CDS).

Did you know?

Perpetual warrants

Warrants that have no expiration date.


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