
C h a p t e r
Chapter ObjeCtives
After studying this chapter, you should be able to:
1 Discuss the principal characteristics of currency forward contracts and currency
futures contracts.
2 Distinguish between currency forwards and currency futures in terms of the cash
flows that they generate.
3 Understand the relationship between currency futures prices and spot rates.
4 Discuss the pricing of currency futures.
5 Explain the concepts of hedge ratio and cross hedging.
Introduction
Individuals and firms including government organizations are exposed to risk in situations
where their holdings and commitments can change in value due to unexpected ...