Substitution of Orders The substitution of forward contracts is allowed. In case shipment under a particular import or export order in respect of which forward cover has been booked does not take place, the corporate can be permitted to substitute another order under the same forward contract, provided that the proof of the genuineness of the transaction is given. Advantages of using forward contracts : They are useful for budgeting, as the rate at which the company will buy or sell is fixed in advance. There is no up-front premium to pay whn using forward contracts. The contract can be drawn up so that the exchange takes place on any agreed working day. Disadvantages of forward contracts : They are legally binding agreements that must be honoured regardless of the exchange rate prevailing on the actual forward contract date. They may not be suitable where there is uncertainty about future cash flows. For example, if a company tenders for a contract and the tender is unsuccessful, all obligations under the Forward Contract must still be honoured. |
| Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more. NOTE:-This work is copyright (©) to its Authors. This is only for Educational Purpose. 2. OPTIONS An option is a Contractual agreement that gives the option buyer the right, but not the obligation, to purchase (in the case of a call option) or to sell (in the case of put option) a specified instrument at a specified price at any time of the option buyer’s choosing by or before a fixed date in the future. Upon exercise of the right by the option holder, and option seller is obliged to deliver the specified instrument at a specified price. The option is sold by the seller (writer) To the buyer (holder) In return for a payment (premium) Option lasts for a certain period of time – the right expires at its maturity Options are of two kinds 1.) Put Options 2.) Call Options PUT OPTIONS The buyer (holder) has the right, but not an obligation, to sell the underlying asset to the seller (writer) of the option. CALL OPTIONS The buyer (holder) has the right, but not the obligation to buy the underlying asset from the seller (writer) of the option. STRIKE PRICE Strike price is the price at which calls & puts are to be exercised (or walked away from) AMERICAN & EUROPEAN OPTIONS American Options The buyer has the right (but no obligation) to exercise the option at any time between purchase of the option and its maturity. European Options The buyer has the right (but no obligations) to exercise the |
| Final Year Project's is One place for all Engineering Projects, Presentation, seminar, summer training report and lot more.
You've reached the end of your free preview.
Want to read all 36 pages?