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Financial terms in "Forex"

1. MGA

2. Band

3. Forex system trading

4. East Carribbean Dollar

5. Samoa (American) Dollar

6. forward booking

7. Kazakhstan Tenge

8. Moldova Lei

9. Guinea-Bissau Franc

10. interest arbitrage

11. Reciprocal Currency

12. Stop Losses

13. currency history

14. unit of account

15. dollar bears

16. Honduras Lempira

17. pipette

18. Purchasing power parity

19. exotic

20. take profit order

21. Cash on Deposit

22. representative money

23. rate differential swap

24. Sterling

25. Conversion price

26. hard cash

27. Croatian Kuna

28. Brazil Real

29. basket of USD shorts

30. forward exchange rate

31. currency conversion

32. NFA Compliance Rule 2-43b

33. leads and lags

34. Bolivian Boliviano

35. Adjustable Peg

36. Pakistani Rupee

37. Bahamas Dollar

38. reciprocal of European terms

39. European Monetary System

40. Authorized Dealer

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45. Herstatt risk

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49. Short Put

50. Spot/Next Roll

51. British monetary unit

52. forex futures

53. location arbitrage

54. flexible exchange rate

55. authorized forex dealer

56. dollar rate

57. euro ETF

58. Currenex

59. TJS

60. intervention mechanism

61. dollar area

62. CNY

63. South African Rand

64. Israeli Shekel

65. Pip

66. Euribor

67. Stop-buy

68. Snake

69. IFEMA

70. Benin Franc

71. dollar gap

72. Haiti Gourde

73. Exchange rate risk

74. international currency exchange rate

75. Azores Escudo

76. Bhutan Ngultrum

77. Foreign Exchange Dealers' Association of India

78. redenomination

79. Serbian Dinar

80. exotic currency

81. soft money

82. Daimyo bond

83. principal exchange rate linked securities (PERLS)

84. Guernsey Pound

85. US Prime Rate

86. net interest rate differential

87. Retail Side

88. Selling Rate

89. foreign exchange

90. Mongolia Tugrik

91. EMS

92. international currency converter

93. constant currencies

94. Canadian Dollar

95. dual currency service

96. Malawi Kwacha

97. active money

98. Point & Figure Charts

99. Norfolk Island Dollar

100. Revaluation

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Featured term of the day

Definition / Meaning of

Stale Price Arbitrage

Categories: Finance,

for a number of assets, the most recent transaction price at 4PM ET does not fully reflect all available market information. One example is international equities that trade on exchanges that are located in different time zones and close 2-15 hours before U.S. markets. In addition, domestic small-capitalization equities and high-yield and convertible bonds often trade infrequently and have wide bid-ask spreads. This can cause the most recent transaction price to be much different from the price that one would see in a liquid market at 4 PM, even for assets that trade on exchanges that are open at that time. Investors can take advantage of mutual funds that calculate their NAVs using stale closing prices by trading based on recent market movements. For example, if the U.S. market has risen since the close of overseas equity markets, investors can expect that overseas markets will open higher the following morning. Investors can buy a fund with a stale-price NAV for less than its current value, and they can likewise sell a fund for more than its current value on a day that the U.S. market has fallen. Similar opportunities exist when the values of infrequently or illiquidly-traded domestic assets have recently changed. With normal market arbitrage, as more traders learn where to buy an item at relatively low cost and where to sell it at relatively high value, market pressures from such traders tend to stabilize prices. With stale price arbitrage, there is no corresponding pressure for market correction. That is, a fund always pays the going market rate even if that fund has an agreement with its customers to only charge them the price from the prior day closing. Accordingly, even if such agreements ultimately impact the prices of trades by the mutual funds, there is no impact on the price paid by the customer of the mutual fund. In that sense, the stale price arbitrage opportunity can last as long as a mutual fund honors its stale price agreement with its customers. Also referred to as net asset value arbitrage or nav arbitrage.

Most popular terms

1. Option Backdating
2. Absolute Exclusions
3. Building Ordinance Coverage
4. Weather Derivative
5. Dilution
6. Life Settlement
7. Management Liability Insurance
8. 403(b)
9. Disclosure
10. Individual Retirement Arrangement (IRA)

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