International Financial Management: An Analytical Framework, 2nd Edition by Pearson

CURRENCY FORWARDS AND FUTURES 219

through final settlement, the holder of a long position is required to deliver the basket of cur-

rencies in the index in the weights specified and in turn receives U.S. dollars. On the other

side, the holder of the short position in a futures contract receives the basket of currencies

and pays U.S. dollars. The U.S. dollar amount for physical delivery in the final settlement is

determinedbymultiplyingthesettlementpriceoftheUSDXfuturescontractonthefinal

tradingdaywithUSD1,000.

Currency Futures in India

Following the foreign currency crisis, particularly the crisis of inadequate foreign exchange

reservesduringtheearly1990s,Indiaembarkedonaseriesofstructuralreformswithregard