Futures and Forex Glossary Dictionary C5

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Cross-Hedging

Hedging a particular futures contract position in one commodity with an offsetting futures contract position in another commodity, with both commodities futures having similar price movements. The hedging instrument differs from the security being hedged. Example: Hedging crude oil futures contract with short position in natural gas.

Cross-Rate

Foreign exchange rate between two currencies other than the US dollar.

Currency

Money in the form of coin and paper notes. Related Term: A Ton of Money

Currency Basket

Value of the amount of a group of currencies used to determine the market value of another currency. Also called currency cocktail

Currency Binary

Having an all-or-nothing single payoff when the currency position on its expiry date reaches a prior stipulated currency exchange rate.

Currency Certificate

A bearer certificate with a specified rate of cash payout and not registered to any one particular owner and used for hedging foreign exchange risk

Currency code

Also referred to as the ISO currency code, the letter abbreviation of a particular country’s currency as per internationally accepted norms. Examples: US$; Rs. (representative of US dollars and Rupees respectively). Related Term: Currenc

Currency Convertibility

Possibility of converting one country’s currency to another country’s currency or gold. Currency convertibility is the cornerstone of the foreign exchange market. Related Term: Currency Sw

Currency Overlay

Money management function involving outsourcing of currency risk management to specialist firms known as overlay managers.

Currency pair

Two currencies that can be traded for each other in foreign currency trades. Example: EUR/USD or USD/JPY Related Term: Currency

Currency Risk

Price changes of one currency as opposed to another causing depreciation in the value of the dollar or other currency denominated overseas investments.

Currency Speculator

Individual or entity involved in currency trading business taking more than average risk in anticipation of future price movements that could result in extraordinary profits. Related Term: Invest, Then Investigate

Curve fitting

A nonlinear regression model that entails the plotting of a line or curve using a group of financial data points to find a suitable equation representing a trend between two variables.