Introduction:

You and your colleagues are a multi-disciplinary team working in the research department of a large investment company in Toronto. Investor and corporate clients of the company are increasingly asking about the cost of foreign exchange charged by financial institutions.

Scope of Project:

Canada: select one of the major banks, also a virtual bank operating in Canada such as xe.com, plus two other major foreign based banks to be selected by team members.

1. Summarize how foreign exchange works from the perspective of the customer and from the perspective of the financial institution. How are rates determined and set for any point in time between two currencies?
2. Describe all risks for both parties and describe what risks are being mitigated through foreign exchange