Forex glossary of terms
Forex glossary - L
Lay Off - To carry out a transaction in the market to offset a previous transaction and return to a square position.
LDC - Less developed countries, often used with respect to secondary debt market.
Leading Indicators - Such statistics as unemployment rates, CPI, Federal Funds Rate, retail sales, personal income, discount rate and the prime rate that are used to predict economic activity.
Leads and Lags - The effect on foreign trade payments of an anticipated move in the exchange rate, normally a devaluation. The importers speeden up the payment for the imports and exporters delay recieving payment for the exports.
Leverage - The use of a small amount of assets to control a greater amount of assets.
Liability - In terms of foreign exchange, the obligation to deliver to a counterparty an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an un-matured forward or spot transaction.
LIBO - Stands for the London Interbank Offer Rate, and is the rate at which major international banks lend to one another. It is widely used as the benchmark for short-term interest rates.
LIFFE - London International Financial Futures Exchange, made up of the three largest future exchanges in the UK.
Limit move - See Maximum price fluctuation.
Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (i.e. 101.50) Limited Convertibility - When residents of a country are prohibited from buying other currencies even though non-residents may be completely free to buy or sell the national currency and the foreign institutional investors also have the liberty to buy and sell shares on the stock exchange of that country.
Liquid and Illiquid Markets - A liquid market is one in which changes in supply and demand have little impact on the asset's price. It is characterized by many bids, offers and players/traders, low volatility and tight spreads. Illiquid markets have less players and larger spreads.
Liquidation - The process of closing out long or short positions by offsetting transactions. Also refers to the process of selling all assets of a bankrupt company to pay off first creditors and then shareholders.
Liquid Assets - Those assets, usually short dated assets like Treasury Bills that can easily be turned into money.
Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability Livestock cycle - A long, repeating pattern of increasing and decreasing livestock supply and prices.
Long - One who has bought a futures or options on futures contract to establish a market position and who has not yet closed out this position through an offsetting procedure. The opposite of short.
Long cash - You own and plan to sell a commodity.
Long hedge - The purchase of a futures contract in anticipation of an actual purchase in the cash market. Used by processors or exporters as protection against an advance in the cash price. See Hedge.
Long (Position) - Refers to the ownership of securities, commodities or currencies, in which there is no intent to sell due to speculation that the price will rise.
Lot - The term used to describe a designated number of contracts, e.g., a 5 lot purchase. Also called "cars."
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