Arbitrage involves entering into financial transactions to obtain risk-free profits by leveraging differences in interest rates, exchange rates, or commodity prices between different markets.
The currency used as the basis for an exchange rate, where foreign currency rates are quoted per single unit of the base currency, commonly US dollars.
The Exchange Rate Mechanism (ERM) is a system introduced by the European Economic Community to reduce exchange rate variability and achieve monetary stability in Europe ahead of the introduction of a single currency, the Euro.
Foreign currency refers to the currency of another country, which is not used in the preparation of an organization’s domestic accounts. This term is important in financial reporting for organizations with international transactions or operations.
In economics, the J-Curve illustrates the expected turnaround in an activity, such as foreign trade, where the initial deterioration is followed by a significant improvement.
The net-investment method, often used in international accounting, is a technique applied to translate a foreign subsidiary's financial statements into the parent company's currency. This method helps in adjusting for fluctuating exchange rates and provides a consistent basis for valuation of the subsidiary’s net assets.
Explore the concept of the ratchet effect, where an economic variable, such as prices or wages, undergoes an irreversible change. Understand how temporary pressures can have lasting impacts on the economy and contribute to inflation.
Reserve assets are financial instruments that a central bank or a government holds to implement monetary policy and ensure financial stability. These assets are crucial for maintaining liquidity, managing exchange rates, and backing up domestic currency.
