Forex Glossary (G-I)

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The seven leading industrial countries: The United States, Germany, Japan, France, United Kingdom, Canada, and Italy.

The price Gap between consecutive trading ranges (i.e. the low of the current range is higher than the high of the previous range)

A system for global after hours electronic trading in futures and options developed by Reuters for CME and CBOT for use in conjunction with various exchanges around the world.

Gold Standard

The original system for supporting the value of currency issued. The way that where the price of gold is fixed against the currency it means that the increased supply of gold does not lower the price of gold but causes prices to increase.

Gold Tranche

Part of the country quota for IMF members that had to be paid in gold. This was normally 25% of the quota, the remainder being in domestic currency. The Gold Tranche was automatically available to members without condition.

Golden Cross

An intersection of two consecutive moving averages which move in the same direction and suggest that the currency will move in the same direction.

Good Until Cancelled
An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month.

Gross Settlement
A process where full payment of each transaction is made rather than clearing a group of transactions as currently occurs in the FX market. A method designed to eliminate capital risk.

Gross Domestic Product
Total value of a country's output, income or expenditure produced within the country's physical borders.

Gross National Product
Gross domestic product plus "factor income from abroad" - income earned from investment or work abroad.

Hard Currency

A currency whose value is expected to remain stable or increase in terms of other currencies.

Head and Shoulders
A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the the price to drop to around the same level as the shoulder. A further modest rise or level will indicate a that a further major fall is imminent. The breach of the neckline is the indication to sell.

A strategy used to offset market risk, whereby one position protects another.

Hedge Ratio
The number of futures or options required to hedge a given exposure in the cash market.

International Commodities Clearing House Limited, a clearing house based in London operating world wide for many futures markets.

International Foreign Exchange Master Agreement

International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans.


International Monetary Market part of the Chicago Mercantile Exchange that lists a number of currency and financial futures.

Implied Volatility

A measurement of the market's expected price range of the underlying currency futures based on the traded option premiums.

Implied Volatility Skews

The implied volatility varies for different strikes of an option.

Implied Rates
The interest rate determined by calculating the difference between spot and forward rates.

A call option is in-the-money if the price of the underlying instrument is higher than the exercise/strike price. A put option is in-the-money if the price of the underlying instrument is below the exercise/strike price.

Inconvertible Currency

Currency which cannot be exchanged for other currencies, either because this is forbidden by the foreign exchange regulations.

Index Linking

The process of linking wages, social benefits payments, prices, interest rates or loan values to an economic index, usually of prices.

Indicative Quote
A market-maker's price which is not firm.

Industrial Production Index
A coincident indicator measuring physical output of manufacturing, mining and utilities.

Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Initial Margin

The margin is a returnable deposit required to be lodged by buyers and sellers with the clearing house to secure a new futures or options position.

The specification of the banks at which funds shall be paid upon settlement.

Inter-bank Rates
The bid and offer rates at which international banks place deposits with each other. The basis of the Interbank market.

Inter-dealer Broker
A specialist broker who acts as an intermediary between market-makers who wish to buy or sell securities to improve their book positions, without revealing their identities to other market-makers.

Interest Arbitrage
Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.

Interest Parity
One currency is in interest parity with another when the difference in the interest rates is equalised by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese Yen against sterling would bring about interest parity.

Interest Rate Options
An agreement permitting a party to obtain a particular interest rate, issued both OTC and by exchanges.

Interest Rate Cap
An agreement that provides the buyer of a cap with a maximum interest rate for future borrowing requirements.

Interest Rate Collar
A combination of a cap and a floor to provide maximum and minimum interest rates for borrowing or lending.

Interest Rate Floor
An agreement which provides the buyer of the floor with a minimum interest rate for future lending requirements.

Interest Rate Swaps
An agreement to swap interest rate exposures from floating to fixed or vice-versa. There is no swap of the principal. It is the interest cash flows be they payments or receipts that are exchanged.

Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

Intra-Day limit
Limit set by bank management on the size of each dealer's Intra Day Position. Intra-Day Position Open positions run by a dealer within the day. Usually squared by the close of the day.

Intrinsic Value
The amount by which an option is in-the-money. The intrinsic value is the difference between the exercise/strike price and the price of the underlying security.

Inverted Market
Where short term instruments are trading at premiums to long term instruments.

Index and Options Market part of the Chicago Mercantile Exchange


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