Currency Futures

This chapter and the next two chapters introduce major financial derivatives used for financial risk management and, in particular, for foreign exchange risk management. Futures are in many ways similar to forwards, the primary distinction being that the former is exchange traded standardised contract and the latter is an OTC product that may be negotiated or tailored to meet the specific needs of the parties involved. However, there is no such contrast for other major derivatives, such as options and swaps – they can be exchange traded and OTC. e.g., an exchange traded option does not distinguish from its OTC counterpart with a different name, unlike futures and forwards, they are both called options.