Documente Academic
Documente Profesional
Documente Cultură
Chapter 12
Derivatives and
Foreign
Currency:
Concepts and
Common
Transactions
1: DERIVATIVES
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Derivative (definition)
2: TYPES OF DERIVATIVES
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Derivatives
– Forward Contracts
– Futures Contracts
– Options
– Swaps
Forward Contracts
Futures Contracts
Futures contracts are a specific type of
forward contract
– Characteristics are standardized
– Characteristics are set by futures exchanges
(Rather than by the contracting parties) so
performance risk is eliminated
– Exchange guarantees performance
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Options
Swaps
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3: FOREIGN CURRENCY
EXCHANGE
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Spot rate
Exchange rate for immediate delivery
Current rate
Exchange rate at balance sheet date,
or
Exchange rate at the time a transaction
takes place
Historical rate
Exchange rate that existed when a
specific transaction or event occurred
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Currency Denomination
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5: RECORDING FOREIGN
CURRENCY TRANSACTIONS
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Convert funds.
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