Currency Derivatives 5 Chapter 15 J Gaspar: Adapted from Jeff Madura, International Financial Currency derivatives are financial instruments
12 3 5 Forward and futures contracts on currencies This chapter covers more derivatives, financial contracts whose value depends on the
Futures contract can be used to establish a long (or short) position in the underlying commodity/asset Features of futures contracts: _ Standardized contracts:
Unlike futures transactions which have no contract costs, options cost the buyer of the option a price (generally ranging from 1 to 5 of the value of the
MAJOR FOREIGN EXCHANGE MARKETS ARE: (a) Spot markets (b) Forward markets (c) Futures markets (d) Options markets, and (e) Swaps markets
Financial derivatives could also be classified by risk categories: (i) foreign exchange; (ii) interest rate; (iii) equities; (iv) commodities; and (v)
Thus, the larger the size of sales of U S non-financial firms, the more likely is to use derivatives in their risk management (Table 5) Foreign currency
5 10 Forward and futures contracts on currencies 5 An appendix to Chapter 12 shows that the Black–Scholes–Merton formula can
Using Derivatives as a Hedge 5 Currency Market • Spot and Forward Exchange Rates • Foreign Exchange Market • How the Price of a Currency Is Quoted
Currency Derivatives 5 Chapter 15 J Gaspar: Adapted from Jeff Madura, International Financial currency options contracts are used for hedging or
Management of Risks CHAPTER- 5 Foreign Exchange Risks CHAPTER - 6 Balance of funds, carry trade, and foreign exchange derivatives products