About EUREX

Eurex is a major futures and options exchange for European benchmark derivatives featuring open and low-cost electronic access globally. Its electronic trading and clearing platform offers a broad range of products and amongst other, operates the most liquid fixed income markets. Eurex was established in 1998 with the merger of Deutsche Terminbörse (DTB, the German derivatives exchange) and SOFFEX (Swiss Options and Financial Futures).

Eurex Repo is the electronic trading solution for repos (sale and repurchase agreements). In its Euro segment, standardized baskets for the General Collateral (GC) market, the German GC Basket, the German Jumbo Basket and the German KfW/Laender Basket (bonds issued by the Kreditanstalt für Wiederaufbau and the German federal states) are offered. Market participants can also trade Repos with Austrian Government Bonds and Treasury Bonds of the European Investment Bank as securities The German GC Basket comprises all German government bonds and bonds issued by the privatization agency (Treuhandanstalt). The German Jumbo Basket comprises Jumbo Mortgage (Pfandbrief) bonds issued by German companies. The KfW/Laender Basket comprises KfW bonds and bonds of the German federal states.

Eurex Repo operates the Swiss Franc Repo Market and the Euro Repo Market.

The Euro Repo Market allows financial service providers across Europe to access a full range of refinancing instruments using European securities. With Eurex Repo, financial institutions are able to use defined GC (General Collateral) baskets to optimize their liquidity management, as well as to benefit from the market transparency that is inherent to an electronic trading system.

Over a hundred international banks use the Swiss Franc Repo Market to manage their liquidity. Market participants from Switzerland as well as from abroad can execute their funding and collateral management operations directly in the Swiss Franc interbank market and take part in the liquidity-auctions conducted by the Swiss National Bank (SNB), which take place almost daily.

Eurex Repo stands for the seamless integration of trading, clearing and settlement of repo transactions in the European and Swiss repo market. Eurex Clearing AG acts as the central counterparty between buyers and sellers, thereby guaranteeing anonymity, efficient risk management and swift settlement at all times.

Participation in the Eurex Bond and Eurex Repo Market is generally open to all banks and financial service providers. Participants must be subject in their country of domicile to a financial market supervisory authority. For private investors, trade at Eurex Repo is not possible at present, as it is a mere interbank market.

Risks involved in Forex

There are two types of currency risk: transaction risk and translation risk. Transaction risk refers to actual conversions of cash flows from one currency to another, and the extent to which exchange rate changes will affect a company's cash flow. Translation risk is more of an accounting issue, and refers primarily to the impact of exchange rates on earnings and balance sheet items when consolidating financial statements from foreign subsidiaries. From a business standpoint, transaction risk is the more relevant of the two.

There are five general types of risk that are faced by all businesses: market risk (unexpected changes in interest rates, exchange rates, stock prices, or commodity prices), credit/default risk; operational risk (equipment failure, fraud); liquidity risk (inability to buy or sell commodities at quoted prices); and political risk (new regulations, expropriation). Businesses operating in the petroleum, natural gas, and electricity industries are particularly susceptible to market risk—or more specifically, price risk—as a consequence of the extreme volatility of energy commodity prices. Electricity prices, in particular, are substantially more volatile than other commodity prices.

Country risk can be divided into two parts, economic risk and political risk. Economic risk refers to the stability of a country's economy. It embodies concerns such as dependence on individual industries or markets, the ability to sustain a vibrant level of activity and to grow, and the supply of natural resources and other important inputs.

Political risk is more concerned with the stability of the government that manages the economy. It encompasses concerns such as the ability to move capital in and out of the country, the likelihood of a smooth transfer of power after elections, and the government's overall attitude toward foreign firms. Obviously, these two branches of country risk overlap significantly. There are a variety of services that provide in-depth assessments of country risk for virtually every country; multinational firms make considerable use of these services to form their own decisions regarding international projects.