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Extremely volatile due to information driven nature 3. Chicago Mercantile Exchange opens the 1.

International Monetary Market IMM Board of Directors sets delivery dates. South African rand Leverage is high 1. Contracts set to a daily price limit restricting maximum daily price movements. If limit is reached, a margin call may be necessary to maintain a minimum margin. If limit is reached, a margin call may be necessary to maintain a minimum margin..

Marking to Market 4. Eliminating default CME may step in to complete the transaction if either side defaults 5. Delivery cancelled CME allows for offsetting transactions cancelling delivery or purchase of the currency. International Monetary Market 2. London International Financial Futures Exchange 3. Chicago Board of Trade 4. Singapore International Monetary Exchange 5. Deutsche Termin Bourse 6. Hong Kong Futures Exchange.

Frequency of delivery 4. Size of contract 5. Futures Contracts Basic differences: Futures Contracts Basic differences:. Well- organized and stable market. Limited to 7 currencies currencies 2. Limited dates of delivery of delivery 3. Why would you use them? Why would you use them. Based on Exercise Dates 1. American exercise date may occur any time up to the expiration date. European exercise date occurs only at the expiration date and not before. European exercise date occurs only at the expiration date and not before..

Exercise Price exchange rate 1. Sometimes known as the strike price. The exchange rate at which the option holder can buy or sell the contracted currency. The exchange rate at which the option holder can buy or sell the contracted currency.. Types of Currency Options 1. Calls give the holder the right to buy a certain amount of currency at a fixed exchange rate. Puts give the holder the right to sell a certain amount of currency at a fixed exchange rate. Puts give the holder the right to sell a certain amount of currency at a fixed exchange rate..

Status of an option 1. What is the premium? What is the premium. Why Use Currency Options?

Foreign exchange market - Wikipedia

For the firm hedging foreign exchange risk with Future event is very uncertain gains. For speculators - profit from favorable exchange rate changes. Why Use Currency Options. For speculators - profit from favorable exchange rate changes.. Using Forward or Futures Contracts Forward or futures contracts are more suitable for hedging a known amount of foreign currency flow.

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Currency Futures and Options Markets Chapter 7.

Chapter 7: Futures and Options on Foreign Exchange Flashcards | Quizlet

Extremely volatile due to. CHAPTER 6 CURRENCY FUTURES AND OPTIONS MARKETS. CHAPTER OVERVIEW CHAPTER OVERVIEW I. California State University, Fullerton. Foundations of Multinational Financial Management 5 th Edition Alan Shapiro J. PowerPoints by Joseph F. International Finance FIN Michael Dimond. International Finance FINA Lecture Hedging currency risk… Covered Interest Rate Parity Read: Chapter 7 Aaron Smallwood Ph.

Learning objectives After completing this you will have an understanding of 1.

Foreign currency futures 3. Michelfelder 1 Outline 6 6. Currency Futures and Options 6. Hedging currency risk with currency options Aaron Smallwood Ph. Preliminaries A futures contract is like a forward contract: My presentations Profile Feedback Log out.

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Currency Futures and Options Markets. CHAPTER 7 Options Contracts and Currency Futures Textbook Chapter 8. OK International Finance FINA Lecture About project SlidePlayer Terms of Service. Feedback Privacy Policy Feedback.