• They are used by MNCs to hedge their
currency positions, and by speculators who hope to capitalize on their expectations of exchange rate movements.
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buyer must aห้องสมุดไป่ตู้d margin.
• If the value of the futures of GBP
decreases from $1.8221 to $ 1.8000, and the minimum margin is $1000,must the buyer add margin?
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Regulation
Liquidation Transaction Costs
Mostly settled by actual delivery. Bank’s bid/ask spread.
(2) Pricing Currency Futures
• Normally, the price of a currency futures
imposes margin(保证金） requirements to cover fluctuations in the value of the contracts.
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Example
• To the buyer: • If the value of the futures decline, the
Standardized Banks, brokers, MNCs. Qualified public speculation encouraged. Small security deposit required. Handled by exchange clearinghouse. Daily settlements to market prices.
contract is similar to the forward rate for a given currency and settlement date.
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(3)Credit Risk of Currency Futures Contracts
• To minimize its risk, the exchange
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Forward Market
• An NDF can effectively hedge future
foreign currency payments or receipts:
April 1 Expect need for 100M Chilean pesos. Negotiate an NDF to buy 100M Chilean pesos on Jul 1. Reference index (closing rate quoted by Chile’s central bank) = $.0020/peso. July 1 Buy 100M Chilean pesos from market.
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• To the seller • If the value of the futures increase, the
seller must add margin.
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(4)Speculation with Currency Futures
• Currency futures are often sold by speculators
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(6)Closing Out a Futures Position
• Holders of futures contracts can close out
their positions by selling similar futures contracts. Sellers may also close out their positions by purchasing similar contracts.
Clearing operation
Customized Banks, brokers, MNCs. Public speculation not encouraged. Compensating bank balances or credit lines needed. Handled by individual banks & brokers.
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Forward Market
• The % by which the forward rate (F )
exceeds the spot rate (S ) at a given point in time is called the forward premium (p ). F = S (1 + p )
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(5)Hedging with Currency Futures
• Currency futures may be purchased by
MNCs to hedge foreign currency payables, or sold to hedge receivables.
April 4 1. Expect to receive 500,000 pesos. Contract to sell 500,000 pesos @ $.09/peso on June 17. June 17 2. Receive 500,000 pesos as expected. 3. Sell the pesos at the locked-in rate.
/economic/regular/fxrates .html.
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ⅡCurrency Futures Market
• Currency futures contracts specify a
standard volume of a particular currency to be exchanged on a specific settlement date.
• Also check out
¤ the ¤ the
National Futures Association at , and Futures Industry Association at /.
• F exhibits a discount when p < 0.
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Forward Market
Example S = $1.681/£, 90-day F = $1.677/£ annualized p = F – S 360 S n
= 1.677 – 1.681 360 = –.95% 1.681 90
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ⅢCurrency Call Options
• A currency call option （看涨期权/买权）
grants the holder the right to buy a specific currency at a specific price (called the exercise or strike price，执行价格或协 议价格) within a specific period of time.
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Forward Market
• A non-deliverable forward contract (NDF，
无本金交割远期合约) does not result in an actual exchange of currencies. Instead, one party makes a net payment to the other based on a market exchange rate on the day of settlement.
3. Incurs $3000 loss from offsetting positions in futures contracts.
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Online Application
•
Visit the Commodity Futures Trading Commission at /.
January 10 February 15 March 19
1. Contract to buy A$100,000 @ $.53/A$ ($53,000) on March 19.
2. Contract to sell A$100,000 @ $.50/A$ ($50,000) on March 19.
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Using forward contracts for Swap Transactions
• A swap transaction(掉期交易） involves a
spot transaction along with a corresponding forward contract that will reverse the spot transaction.
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Comparison of the Forward & Futures Markets
Forward Markets Marketplace Worldwide telephone network Self-regulating Futures Markets Central exchange floor with worldwide communications. Commodity Futures Trading Commission, National Futures Association. Mostly settled by offset. Negotiated brokerage fees.