tailieunhanh - Lecture International financial management: Chapter 8 - Foreign currency futures market

Chapter 8 "Foreign currency futures market" lecture International financial management introduce to you the content: Contract specifications, futures contract daily settlement, hedging by Futures contract, speculation using Futures contract,. | CHAPTER EIGHT FOREIGN CURRENCY FUTURES MARKET ER OVERVIEW Introduction Contract specifications Futures contract daily settlement Hedging by Futures contract Speculation using Futures contract 2 FOREIGN CURRENCY A foreign currency futures contract is an agreement for future delivery of an amount of foreign exchange at a fixed time place and price - Foreign currency futures are standard contracts traded on an exchange but foreign exchange forward FX forward contracts are contracts traded in the over-the-counter market - The other differences between foreign currency futures and FX forward contracts are compared on Slide 12. It is similar to futures contracts that exist for other underlying assets like gold cattle Treasury bonds etc. The most important market in the world for foreign currency futures is the CME group - CME Group was created on July 12 2007 from the merger between the Chicago Mercantile Exchange CME and the Chicago Board of Trade CBOT LES CONTRACT - Many other exchanges throughout the world trade futures contracts LIFFE SOFFEX TIFFE SIMEX. - There are many kind of futures contracts - Commodity futures contract - Foreign currency futures contract - LIBOR futures contract - T-Bill futures contract and - Futures contract on S P s 500 Stock Index. 1 LES CONTRACT Contracts of exchange-traded derivatives are standard contracts established by the exchange on which the derivatives are traded Major features of the foreign currency futures that are standardized are as follows - Contract size also called the notional principal - Method of stating exchange rates American terms are used . the us price of one foreign currency - Maturity date matured on the third Wednesday of Jan. Mar. Apr. Jun. Jul. Sept. Oct. and Dec. - Last trading day the second business day prior to the maturity date - Commissions Customers pay a commission to their broker for a round transaction which differs from that in the interbank market dealers earn the bid and ask spread and do not .