Derivatives

A derivative is a financial product

the value of which is derived
from the value of underlying
asset.
• Future contracts
• Option contracts
• Swaps
 Currency Future

Currency future is a standardized

agreement to deliver or receive a
specified amount of specified
currency at a specified price and
the date.
 Features of future contract
• It is a standardized specific sized
contract
• The quotations are quoted in direct
quotes
• The contract has a standard maturity
date
• A specified last trading day
• Collateral requirement
• Commission payment
• Clearing house as a counter party
• Settlement on the final date of delivery
 Trading in future contract

• Customer contacts the broker or a

brokerage firm to buy or sell
futures.
• Customer deposits the initial margin
with the broker.
 Example
suppose