The Law Dictionary

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FORWARD FOREIGN EXCHANGE (FX) CONVERSION Definition & Legal Meaning

Definition & Citations:

An ARBITRAGE strategy in the FOREIGN EXCHANGE market to take advantage of mispricing in currency FORWARDS. The conversion occurs when forwards appear CHEAP, and is created by buying a forward, selling a CALL OPTION, and buying a PUT OPTION (all with the same maturity date); if the forward is mispriced, the strategy yields an arbitrage profit. See also FORWARD FOREIGN EXCHANGE REVERSAL.

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