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International Financial Management by Thummuluri Siddaiah

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Chapter 6

Currency Forwards and Futures

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

  • Discuss the principal characteristics of currency forward contracts and currency futures contracts.

  • Distinguish between currency forwards and currency futures in terms of the cash flows that they generate.

  • Understand the relationship between currency futures prices and spot rates.

  • Discuss the pricing of currency futures.

  • Explain the concepts of hedge ratio and cross hedging.

  • Understand the concept of interest rate futures.

6.1 Introduction

Firms are exposed to risk in situations where their holdings can change in value due to unexpected changes in business conditions. There are different types of risks that firms are exposed to ...

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