Chapter Nine Futures and options on Foreign Exchange Chapter objective This chapter discusses exchange-traded currency futures contracts, options contracts, and options on currency futures
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. INTERNATIONAL FINANCIAL MANAGEMENT EUN / RESNICK Second Edition 9 Chapter Nine Futures and Options on Foreign Exchange Chapter Objective: This chapter discusses exchange-traded currency futures contracts, options contracts, and options on currency futures
Chapter Outline o Futures contracts: preliminaries o Currency Futures markets Basic Currency Futures relationships o Eurodollar interest rate futures Contracts o Options Contracts: Preliminaries Currency Options Markets o Currency Futures Options Irwin/McGraw-Hill 9-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Outline ⚫ Futures Contracts: Preliminaries ⚫ Currency Futures Markets ⚫ Basic Currency Futures Relationships ⚫ Eurodollar Interest Rate Futures Contracts ⚫ Options Contracts: Preliminaries ⚫ Currency Options Markets ⚫ Currency Futures Options
Chapter Outline(continued) o Basic Option Pricing relationships at Expiry o American Option Pricing relationships o European Option Pricing relationships o Binomial Option pricing model o European Option Pricing Model o Empirical Tests of currency option models Irwin/McGraw-Hill 9-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Outline (continued) ⚫ Basic Option Pricing Relationships at Expiry ⚫ American Option Pricing Relationships ⚫ European Option Pricing Relationships ⚫ Binomial Option Pricing Model ⚫ European Option Pricing Model ⚫ Empirical Tests of Currency Option Models
Futures Contracts: Preliminaries a futures contract is like a forward contract a It specifies that a certain currency will be exchanged for another at a specified time in the future at prices specified today A futures contract is different from a forward contract Futures are standardized contracts trading on organized exchanges with daily resettlement through a clearinghouse Irwin/McGraw-Hill 9-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Futures Contracts: Preliminaries ⚫ A futures contract is like a forward contract: ◼ It specifies that a certain currency will be exchanged for another at a specified time in the future at prices specified today. ⚫ A futures contract is different from a forward contract: ◼ Futures are standardized contracts trading on organized exchanges with daily resettlement through a clearinghouse
Futures Contracts: Preliminaries o Standardizing features Contract Size Delivery month a Daily resettlement o Initial Margin(about 4% of contract value, cash or T-bills held in a street name at your brokers) Irwin/McGraw-Hill Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Futures Contracts: Preliminaries ⚫ Standardizing Features: ◼ Contract Size ◼ Delivery Month ◼ Daily resettlement ⚫ Initial Margin (about 4% of contract value, cash or T-bills held in a street name at your brokers)