Question

Define the following terms;

order-driven market   

Price-Driven market

Derivatives

Exchange Rate Regime

Answer 1

In an order driven market, buyers and sellers of assets are able to place orders for assets they wish to purchase or sell. They can list at market price, which executes a market order instantaneously at the best available price. Alternatively, they can list a fixed/limit price, which executes either a limit or stop order, not to be executed until certain pricing conditions are met.

A quote driven market contrasts with an order driven market, where the bid-ask spread is determined by orders directly by investors. A quote driven market is also called a price driven market and is usually on an electronic exchange.

A derivative is a financial contract that derives its value from an underlying asset. The buyer agrees to purchase the asset on a specific date at a specific price. Derivatives are often used for commodities, such as oil, gasoline, or gold.

An exchange rate regime is the system that a country's monetary authority, -generally the central bank-, adopts to establish the exchange rate of its own currency against other currencies.