The Law Dictionary

Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.

What is FORWARD FOREIGN EXCHANGE (FX) REVERSA

L An ARBITRAGE strategy in the FOREIGN EXCHANGE market to take advantage of mispricing in currency FORWARDS. The conversion occurs when forwards appear RICH, and is created by selling a forward, buying a CALL OPTION, and selling 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 CONVERSION.

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