Terms and definitions to help you make sense of foreign exchange.
The exchange of currencies usually 2 Business Days after Trade Date.
The exchange of currencies on the same day as the Trade Date.
The exchange of currencies 1 Business Day after the Trade Date.
A document, like a receipt, confirming exact details of an FX transaction.
The date an FX transaction is entered into, also known as the Contract Date.
The agreed date that currencies will be exchanged for the FX transaction.
A commercial business day which is not a public holiday in either currency.
Cut Off Time
The time a payment must be submitted and authorised by on a Business Day to be processed same day (varies by currency).
The two currencies used in an FX transaction which determines the Exchange Rate (e.g. AUD/USD).
The price of one currency expressed in terms of another currency.
The rate at which the market is willing to pay for one unit of currency.
The rate at which the market is prepared to sell one unit of currency, also known as Ask Price.
The difference between the Bid Price and the Offer Price. A wider spread often indicates a less liquid market.
A wholesale rate, generally available only to large financial institutions, often used as a benchmark for consumers.
An advancing market characterised by positive sentiment. The opposite of a bear market.
A declining market often associated with widespread pessimism. The opposite of a bull market.
Techniques used to reduce the impact of adverse currency events (e.g. Forwards and Options).
A Forward Exchange Contract is the exchange of currencies on a future date, at a rate agreed today.
Exchange of two currencies at start and end of the contract. Interest payments are often paid over the life of the swap.
A Forward which, due to country restrictions, is net settled rather than physically exchanged.
AUD Put Option
The right, but not the obligation, to sell AUD and buy another currency at an agreed rate, on an agreed settlement date.
AUD Call Option
The right, but not the obligation, to buy AUD and sell another currency at an agreed rate, on an agreed settlement date.
The specified price at which the holder can exercise their option.
The price of an option driven by time, volatility, face value and strike price. Typically paid upfront.
Foreign Currency Account
A transaction account denominated in a non-AUD currency, used for payments and receipts in that currency.
Historic Rate Rollover
An extension to the settlement date of an existing FX transaction without the need for cancellation and at the original exchange rate.
An earlier Settlement Date for an FX Spot or Forward transaction prior to the initially agreed date.
A revised Settlement Date that is after the agreed expiry date of the transaction.
CNH refers to the Chinese Yuan used in the offshore market outside Mainland China. CNY is used in the onshore Mainland China market.
The international standard used to identify a bank in international payments, also known as BIC.
International Bank Account Number: the standard code used in Europe (and other countries) to identify an account number.
SWIFT GPI Tracking
The ability to track the status of an international payment in real time.
International Money Transfers are a type of Telegraphic Transfer used to send funds to another country.
Bank To Convert
Standard retail FX rates available on International Money Transfers.
Real Time Rate
Preferential FX rates available on certain International Money Transfers.
Correspondent Bank Fee
The fee charged by the intermediary bank facilitating the transaction.
Absolute Price Risk: the sensitivity of the option price to a change in the post price.
Volatility Risk: the rate of change in an option's value relative to a change in the volatility factor.
Time Decay: the measurement of the sensitivity to changes in time decay.
An optional settlement period that fixes the exchange rate of two currencies. The rate can be used any time before expiry.
Guidance for your business
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The information provided on this page is intended to be of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Examples are for illustrative purposes only. Before acting on the information on this website, National Australia Bank Limited (ABN 12 004 044 937, AFSL and Australian Credit License 230686) (NAB) recommends you consider whether it is appropriate for your objectives, financial situation and needs. NAB recommends that you seek independent advice before acting on any information on this webpage.
Target Market Determinations for these products are available at nab.com.au/TMD.