Forward Exchange Rate: A Banker’s View

Abstract

The standard theoretical approach to the analysis of the forward exchange rate and capital flows is challenged by foreign exchange dealers on the grounds that it ignores the mechanisms through which banks (which make the market) provide forward exchange facilities. The traditional analysis implicitly assumes either that speculators and arbitrageurs deal direct with each other or, more realistically, that banks act solely as brokers. The alternative analysis of the forward exchange market offered by bankers is frequently termed the Cambist approach.