Speculation and Arbitrage in Currency Futures

Speculation: Future contracts are extremely attractive for speculators as they provide tremendous leverage. By paying a small margin amount, speculators can take higher exposure of …

Cost of Carry Model

This model assumes that arbitrage between the cash market and the futures market eliminates all imperfections in pricing, i.e., unaccounted for differences between the cash …

Application of Market Index

People from many walks of life use and are affected by market indexes. Economists and statisticians use stock-market indexes to study long-term growth patterns in …

Interest Rate Swaps

An interest rate swap is a type of a derivative contract through which two counterparties agree to exchange one stream of future interest payments for …

Forward Rate Agreement

A Forward Rate Agreement, or FRA, is an agreement between two parties who want to protect themselves against future movements in interest rates. By entering into an …

Types of Derivatives

Form # 1. Forward: Forward contract is a transaction which binds a seller to deliver at a future date and the buyer to correspondingly accept …

Forward Market Transactions, Forward Contracts

Forward Market Transactions Forward Contracts Forward contracts are the simplest form of derivatives that are available today. Also, they are the oldest form of derivatives. …

Forward Market in India

In India, the forward markets facilitate the hedging of transactional and contractual exposures. Transactional exposures are allowed to be hedged up to the amount of …

Hedging with Forwards

The Forward Contract is an agreement between two parties wherein they agree to buy or sell the underlying asset at a predetermined future date and a price …

Working Capital Control and Banking Policy- Deheja Study Group, Chore Committee, Tandon Committee

The Dahejia Committee: In September 1969, Dahejia Committee of the RBI pointed out in its reports that in the financing practice of banks, there was …

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