Key Activity of Forward Exchange Market & Its Benefits to International Trade

International trade
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK...............................................................................................................................................3
Discuss the key activity of forward exchange market & its various benefits to international
trade........................................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6
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INTRODUCTION
Main objective of writing this essay is to better understand the concept of international trade.
It is the exchange of goods and services across the international borders. Every country produce
goods and services on which the domestic opportunity cost is lower as compare to the domestic
opportunity cost of other countries and exchange those goods and services for products that have
higher domestic opportunity cost. In other words it can be say that any economic transaction
between different countries is international trade. The transactions of international trade are
facilitated with the help of international financial payments. For this the private bank and central
bank play an essential role. The purpose of the essay is to effectively analysis the importance of
forwards exchange market for international trade. It is a market for contracts between the traders
which ensure the future delivery of a foreign currency at a specified exchange rate (Bilson and
Marston, 2019). The price of forward contract is known as the forward rate. Forward market is
related to the exchange of forward and future contract. This essay includes the concept of
forward exchange market and its work for international exporters in the floating exchange rate
system. Other than this it includes various importance of forward exchange market for
international trade are discussed in this essay.
MAIN BODY
TASK
Discuss the key activity of forward exchange market & its various benefits to international trade.
Trade refers to an activity which includes buying and selling of goods and services
between people, firm and countries. While international trade refers to exchange of capital,
goods and services between different countries (Hiscox, 2020). It allow countries to expand their
market area and also access those goods and services which are not domestically available
because of this the international market is more competitive pricing and provide cheaper
products to consumer. The concept of international trade is include two important activity which
are import and export. When a country sold any product and service to the global market that it is
called export and when a country purchase any kind of goods and services from the global
market it is called import (Feenstra, 2019).
Forward exchange market refers to an over- the-counter marketplace which set a fix price
of goods for future delivery (A.X.Y and et. al. 2019). Main use of forward market is for trading a
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