Trading Instrument - Cash Instruments

There are various instruments tiger trade, where products are instruments commonly traded internationally or called 'vanilla product', because they are a pure form. The main currencies traded was USD, EUR, JPY and GBP.

Cash instruments

Spot foreign exchange transactions
Spot transactions are foreign exchange transactions for the next 2 days or it is called date spot. 2-day period arising from interbank settlemen instructions to use the telegraph and the bank took 2 days to ensure that the instructions can be executed. The market for spot transactions is the most liquid market in the world. Transactions spot foreign exchange risk caused.

Forward foreign exchange transaction
Forward transactions are foreign exchange transactions on the date specified is longer than the spot date and not more than 1 year (but there are banks that transact more than 1 year) transaction Forward exchange rate and lead to interest rate risk, because of the forward rate is determined by the level of interest rates of two currencies, combined with the current spot rate.

Foreign exchange rate swap
Swap is a combination of spot and forward. The two parties conduct spot transactions in the spot rate and forward to the forward at the same rate to the principal amount and the same currency. The difference of the two rates reflects the difference between the interest rate of 2 currency transactions during that period. Raises interest rate swap risk.

Loans and deposits
Loans and deposits traded between banks (interbank money market) at a fixed rate for a certain period. Period of time varies from overnight to 5 years, but rarely deals with maturity> 1 year. Interest paid at maturity together with the payment of principal, unless the maturity> 1 year of interest payments made each year. Interbank money market used by banks to take positions in anticipation of interest rate movements. But many bank transactions due to the need to match the funding needed to maintain their liquidity positions. Loans and deposits lead to interest rate risk.

Bonds
Bonds are long-term debt that can dipindahtangan and published by the borrower (issuer) when receiving money from the investor (holder). Bond issuer must pay interest, usually in a regular, long term bonds and to pay principal at maturity.
'Vanilla' bond usually has a fixed interest rate called the 'coupon', which will dibayatkan on a predetermined date for a period of paid bonds and principal at maturity. The term vanilla is used to indicate bonds that have a standard feature. However, bonds may have financial incentives to attract investors vary.
Bond prices are influenced by interest rates and financial condition of the issuer. Rating agencies like Moody's and S & P yield grade which covers a broad credit risk from bonds, from AAA (issuer's ability to pay principal and interest is very strong) to D (there are arrears / default). Bond raises general interest rate risk and specific risk. Non-vanilla bonds will lead to other types of risks such as liquidity risk.

Equity trading
Equity trading is the buying and selling shares of a company on the stock exchanges around the world. Shareholders will receive a regular dividend, paid out of corporate profits and rising stock values. The stock price reflects the market perception of the value of the company and the value of the projection pendaptan. Stock prices if the market fluctuates to adjust the assessment of the company as a response to information received about the company. Position led to general equity shares risk and specific risk.

Commodity trading
Commodity trading is the buying and selling physical products that are traded on the secondary market. The products include: agricultural products, oil and precious metals. Products purchased and sold to be sent to a specified location on a predetermined date. There are spot and forward markets for many products and each product has additional features that are directly related to the physical nature of the product.

Examples of product-specific feature is the oil trade.
Besides crude oil, a product of refining crude oil traded on the market. Each product has its own market and price.
Location is very important to the buyer. Sebuat crude oil tankers in the U.S. has a different value to buyers in the USA than tankers in Malaysia due to differences in demand / supply balance in each State and the oil transportation costs between countries. .

Commodity position risk and caused commodity forward position raises interest