Final answer:
Shorthand notation for bid and ask forward prices using forward points is a convenient, efficient, and precise method used by bank dealers for quoting prices in financial markets.
Step-by-step explanation:
Bank dealers use shorthand notation to quote bid and ask forward prices in terms of forward points because it is a convenient method that streamlines the process of conveying price information. This notation is beneficial for multiple reasons. Quicker and easier communication: This shorthand allows for rapid discussion among dealers, which is essential in the fast-paced financial markets. Reduces the chance of misinterpretation: Given that this is a standardized practice, it minimizes the risk of errors in communication, ensuring that all parties are on the same page.
The use of forward points enables more accuracy in price quotes, important in managing risk and setting expectations. Such practices tie back to the concept of the market system as an efficient mechanism for disseminating information and establishing prices without needing a central agency to oversee market responses.