ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -There are two distinct segments of OTC foreign exchange market. One segment is called as “interbank” market and the other is called as “merchant” market. Interbank market is the market between banks where dealers quote prices at the same time for both buying and selling the currency.

Detailed explanation-2: -5.3. The foreign exchange market or forex market is the market where currencies are traded. The forex market is the world’s largest financial market where trillions are traded daily. It is the most liquid among all the markets in the financial world.

Detailed explanation-3: -Foreign exchange markets are made up of banks, forex dealers, commercial companies, central banks, investment management firms, hedge funds, retail forex dealers, and investors.

Detailed explanation-4: -Currency Arbitrage Previously, arbitrage was conducted by a trader sitting in one city, such as New York, monitoring currency prices on the Bloomberg terminal. Noticing that the value of a euro is cheaper in Hong Kong than in New York, the trader could then buy euros in Hong Kong and sell them in New York for a profit.