FINC415 Midterm: FINC415 Exam 2 book notes
15 Mar 2017
School
Department
Course
Professor
Document Summary
Chapter 7: foreign currency derivatives: futures and options. Foreign currency futures for speculation and hedging in american terms (us dollar cost of a fx $/mxn) delivery of a standard amount of foreign exchange at a fixed time, place and price (similar to those for commodities) standardized. If investor believes the value of a currency will. Value = - notional * (spot future) = -500kmxn x (. 095 - . 10958) = : long position (buy and hold) if investor expects commodity. If the value at maturity rose ($. 10958 $. 25/mxn) then would have lost on futures contract currency to rise v. transaction currency (usd) then take a. Ii. long position locking in a price at which you must buy currency of specified future date. Value at maturity = + notional x ( spot futures) 500k x ($. 11/mxn - $. 10958) = profit. Exercise/strike price exchange rate at which foreign. Premium cost/price/value of the option itself (writer.
