The following points highlight the four main products of currency derivatives. The products are: 1. Forward Contract 2. Futures Contract 3. Options Contract 4. Swaps. 1. Forward Contract: Forward contracts are used by companies and individuals to hedge currency risk. In December 2003, the RBI permitted resident individuals to enter into forward contracts to hedge their foreign exchange risk. Resident [...]
A call option give the buyer the right but not the obligation to buy a given quantity of the underlying asset, a given price known as 'exercise price' or 'strike price' on or before a given future date called the 'maturity date' or 'expiry date'. A call option gives the buyer the right to buy a fixed number of shares/commodities [...]
The put option gives the buyer the right, but not the obligation, to sell a given quantity of the underlying asset at a given price on or before a given date. The put option gives the buyer the right to sell the underlying asset at the exercise price up to the date of the contract. The seller of put option [...]