Exercise-Currency Futures and Options

Exercise-Currency Futures and Options - Exercise-Currency...

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Exercise-Currency Futures and Exercise-Currency Futures and Options Options Currency Futures are standard value forward contracts that oblige parties to exchange a particular currency on a specific date and at a predetermined rate. In order to clarify characteristics of a futures contract, let us refer to the characteristics of a forward contract. 1
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Futures Contracts (cont’d.) Futures Contracts (cont’d.) Futures contracts are of specific sizes and for specific maturities (i.e. very structured and therefore less flexible as compared to forward markets. The fundamental difference between two contracts is the structure of the cash flows within the maturity period. A forward contract requires a single cash flow which occurs at the maturity date, whereas the futures market stipulates daily settlement of the contract. Futures contracts are renewed at the end of each trading day. The Futures market can be left at any time between initiation and the maturity of the contract by simply reversing the original position 2
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