Editing Exchange rate (section)

===Asset market model===
{{See also|Capital asset pricing model|Net capital outflow}}

The increasing volume of trading of financial assets (stocks and bonds) has required a rethink of its impact on exchange rates. Economic variables such as [[economic growth]], [[inflation]] and [[productivity]] are no longer the only drivers of currency movements. The proportion of foreign exchange transactions stemming from cross border-trading of financial assets has dwarfed the extent of currency transactions generated from trading in goods and services.<ref>[http://faculty.haas.berkeley.edu/lyons/docs/bookch1.pdf The Microstructure Approach to Exchange Rates, Richard Lyons, MIT Press] (pdf chapter 1)</ref>

The asset market approach views currencies as asset prices traded in an efficient financial market. Consequently, currencies are increasingly demonstrating a strong [[correlation]] with other markets, particularly [[Stock|equities]].

Like the [[stock exchange]], money can be made (or lost) on trading by investors and speculators in the [[foreign exchange market]]. Currencies can be traded at spot and [[foreign exchange option]]s markets. The [[wiktionary:spot market|spot market]] represents current exchange rates, whereas options are [[derivative (finance)|derivatives]] of exchange rates.