Thesis on currency derivatives

This hypothesis is consistent with the findings obtained by Allayannis, G and Weston, JP who assert that there is a positive relationship between the use of foreign currency derivatives and the firm value.

The market brings together divergent categories of buyers and sellers. Later, a new stream of literature emerged seeking for variations in risk premiums which could explain the different correlations between the future rates and the spot rates at maturity.

research topics in financial derivatives

Currency Futures A futures contract is a standardized contract, traded on an exchange, to buy or sell a certain underlying asset or an instrument at a certain date in the future, at a specified price. The abandonment of the Bretton Woods agreement resulted in currency values being allowed to float, increasing the risk of doing business.

References Executive Summary The purpose of this report is to discuss the role of currency futures in risk management as well as their main advantages and drawbacks. Specifically; certainty of cash flows and minimisation of fluctuation in earnings are recognized in the literature as the most relevant aims of managing foreign exchange risk see Geczy et al, ; Marshall, A.

Regarding geographical differences in the rate of utilization, Marshall A. By creating another type of market in which futures could be traded, CME currency futures extended the reach of risk management beyond commodities, which were the main derivative contracts traded at CME until then.

Currency Derivatives Product Derivative contracts have several variants.

research proposal on derivatives

Belk P. All settlements however, unlike in the case of OTC markets, go through the exchange. Unlike currency forwards, which are tailored to meet the specific needs of the companies, currency futures trading presents serious flexibility problems arisen from the standardisation of delivery dates, contract sizes and the number of currencies available in the market.

However; several researches, such as Allayannis, G. Application 3.

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Currency derivatives