1. Give a full definition of the market for foreign exchange. 2. What is the difference between the retail or client market and the wholesale or interbank market for foreign exchange? 3. Who are the market participants in the foreign exchange market? 4. How are foreign exchange transactions between international banks settled? 5. What is meant by a currency trading at a discount or at a premium in the forward market? 6. Why does most interbank currency trading worldwide involve the U.S. dollar? 7. Banks find it necessary to accommodate their clients' needs to buy or sell FX forward, in many instances for hedging purposes. How can the bank eliminate THE FOREIGN EXCHANGE MARKET. EXCHANGE RATE DETERMINATION, AND CURRENCY DERIVATIVES currency exposure it has created for itself by accommodating a client's forward transaction? 8. A CD/$ bank trader is currently quoting a small figure bid-ask of 35-40, when the rest of the market is trading at CD 1.3436-CD 1.3441. What is implied about the trader's beliefs by his prices? 9. What is-'triangular arbitrage? What is a condition that will give rise to a triangular arbitrage opportunity? 10. Over the past five years, the exchange rate between the British pound and the U.S. dollar, $/, has changed from about 1.90 to about 1.45. Would you agree that over this five-year period, British goods have become cheaper for buyers in the United States?