Pips in Forex Trading
So, what is a pip, then? Pip stands for “percentage in point.” Sometimes you may hear people refer to pips as points for matters of Forex trading, and it is the smallest unit of price for a currency being traded. It appears in the place of the last decimal point in exchange rates and currency pairs. When dealing with most currencies, it is 0.0001. This means that if you bought USD/CHF 1.3475 and sold at 1.3489, you made 14 pips on that trade.
A Greek Default and Derivative Consequences
As the Greek euro-crisis continues to develop to the point where a default is looking more and more likely to be a serious option on the table, concern over the opaqueness of the derivatives market and the effects of a potential “hidden A.I.G” are causing some analysts to push for a “voluntary” solution. It is uncertain exactly, or even roughly, how much of the debt is insured by derivatives holders, and how concentrated those contracts are. The more concentrated the derivatives contracts are, the more unlikely that the companies holding them will be able to pay out the billions of dollars that would be required of them during a Greek default in order to cover their losses. While regulators have a wide range of estimates how exactly how much of the Greek debt is tied up in derivatives contracts, ranging from $5 billion in net exposure and $78.7 in gross exposure, it remains clear that a Greek default would have far-reaching effects.
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