Currency Futures

Peijie Wang
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Peijie Wang: Plymouth University

Chapter 13 in The Economics of Foreign Exchange and Global Finance, 2020, pp 321-336 from Springer

Abstract: Abstract Similar to forwards, a futures contract specifies that a certain amount of an asset, a financial asset or a commodity, will be purchased or sold at a predetermined price at a predetermined future time. Unlike forwards, futures are standardized contracts trading on organized exchanges with daily resettlement through a clearinghouse. Futures contracts are standardized in contract size and delivery time, and are marked-to-market. That is, gains or losses are credited or debited daily from a margin account that must be opened prior to trading, so losses are not possible to accumulate. Whereas a forward is a private agreement between a buyer and a seller for the future delivery of an asset at an agreed price, with the negotiated contract size, delivery time and delivery method, being settled at the end of the contract period. Table 13.1 contrasts a futures contract with a forward contract. Replacing in the above the general term “an asset” by a specific one “a currency”, currency futures emerge.

Date: 2020
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DOI: 10.1007/978-3-662-59271-7_13

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