Term
| Currency Futures: Definition |
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Definition
| Contract written requiring delivery of a standard quantity of an available currency at a fixed exchange rate at a set delivery date. |
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Term
| Currency Futures: International Monetary Market (IMM) |
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Definition
Opened by the Chicago Mercantile Exchange, 1972.
Purpose to provide a stable market for the exchange of currency futures.
Provide outlet for hedging currency risk with futures contracts. |
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Term
| FUTURES vs. forwards contracts |
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Definition
Trading Locations
Regulation
Frequency of Delivery
Size of Contract
Transaction Costs
Quotes
Margins
Credit Risk |
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Term
| Global Futures Exchanges: |
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Definition
| Located Worldwide, Japan has more exchanges than the U.S. |
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Term
| Futures VS. Forwards Regulation |
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Definition
Forwards: Self Regulated
Futures: Clearing house (Commodity futures trading commission)
Futures tend to replace forwards, especially in agriculture. |
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Term
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Definition
1) Easy Liquidation
2) Well-organized and stable |
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Term
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Definition
1. Limited Currencies
2. Limited Delivery Dates
3. Rigid Contract sizes |
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Term
| Currency Options: Definition |
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Definition
| Contract from a writer (Seller) that gives the buyer the RIGHT to buy or sell a standard amount of an available currency at a fixed exchange rate for a standard fixed time period. |
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Term
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Definition
| Give the owner the right to BUY currency |
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Term
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Definition
| Gives the owner the right to SELL the currency |
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Term
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Definition
American: Up to the expiration date
European: On the expiration date (But not before) |
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Term
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Definition
| The price of an option the writer charges the buyer |
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Term
| Exercise price: "Strike Price" |
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Definition
| The exchange rate at which the option holder can buy or sell the contracted (underlying) currency |
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Term
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Definition
In the money: making money
Out of the Money: Not making money
At the money: Spot = Strike or even money |
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Term
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Definition
| Standardized options that trade on exchanges |
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Term
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Definition
| Trade over the counter, sometimes called OTC options. Very active OTC market for currency options |
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Term
| Additional Items to Study: |
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Definition
Supplemental article and Charts in Chapter 8.
Put/Call spread graphs in Chapter 8 |
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