What Are Your Options?
There are perhaps 160 different currencies in the world. While all currencies necessarily have exchange value, the majority of them are not exchanged outside of the territories where they are used. The Continuous Linked Settlement Bank (CLS) settles trades in only 17 currencies, and liquidity is greatest for an even smaller group of selected currencies. These so-called major currencies account for more than 90% of global foreign exchange volume and tend to be characterized by tight spreads and excellent liquidity. Expanding this group to include 20 or so exotic currencies can account for more than 97% of overall volume, as shown in Figure 2-1.
KeywordsCentral Bank Call Option Credit Default Swap Future Contract Strike Price
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