what is a typical way forex brokerages can provide cheap leverage for their customers?
what is a typical way forex brokerages can provide cheap leverage for their customers?
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barrymac · External communityPost link
External question — Quantitative Finance Stack Exchange
Author: barrymac
Original post: https://quant.stackexchange.com/questions/3185
License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/
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I'm not very well read in the area of high finance but I'm curious how forex brokerages are able to provide the backing for leverage that they can provide to customers.
Is it possible to do this without charging interest, only making the return on the spread against the rates they can get?
Are there standard algorithms that can be used to this end?
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rupweb · External communityPost link
External answer — Quantitative Finance Stack Exchange
Author: rupweb
Original post: https://quant.stackexchange.com/a/14436
License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/
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In a nutshell, the client only manages their own position, with the client credit line provided by the broker, whereas the broker manages all their clients' positions, using the broker credit line with their provider banks. You can work it out from there. Interest is presumably to do with cash deposits and loans.
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Quoted from Forex.com.bd-Editorial External question — Quantitative Finance Stack Exchange Author: barrymac Source score (net votes, not local likes): 3 Original post: https://quant.stackexchange.com/questions/3185 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I'm not very well read in the area of high finance but I'm curious how forex brokerages are able to provide the backing for leverage that they can provide to customers. Is it possible to do this without charging interest, only making the return on the spread against the rates they can get? Are there standard algorithms that can be used to this end?
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