Currency derivatives is a kind of new class of assets available for investment. Please go through this PPT which will give you some idea about currency & Currency derivatives.

1. CURRENCY
BY RAJIN

2. WHAT IS CURRENCY.?
• A generally accepted form of money, including coins
and paper notes, which is issued by a government and
circulated within an economy. Used as a medium of
exchange for goods and services, currency is the basis
for trade.
• Eg. – Indian Rupee is a currency circulated by
RBI(Central Bank in India).
• USD is a currency we use for International
Transactions

3. CURRENCY TRADING
• While trade is international, currencies are
national. As international transactions are
settled in global currencies, usually they are
brought/sold for one another and this
constitutes 'currency trading'."

4. FACTORS AFFECTING EXCHANGE RATE OF
CURRENCY
ECONOMICAL
•
SUPPLY & DEMAND
•
GDP,IIP
•
WPI
•
Fiscal Deficit
•
Current Account Deficit
•
Monetary Policy Domestic
International
•
Government policies
•
Crude Oil Prices
•
Trade Data

5. FACTORS AFFECTING - OTHER
• POLITICAL -
Geo political
• SPECULATION

6. HOW AND WHY DOES THE DEMAND AND
SUPPLY OF A CURRENCY INCREASE AND
DECREASE?
A rise in export earnings of a country increases
foreign exchange supply.
A rise in imports increases demand. These are the
objective reasons, but there are many subjective
reasons too.
Some of the subjective reasons are:
 Directional viewpoints of market participants
 Expectations of national economic performance,
 Confidence in a country’s economy and so on.

7. WHAT IS CURRENCY DERIVATIVES..?
• The term 'Derivatives' indicates it derives its value from
some underlying i.e. it has no independent value.
Underlying can be securities, stock market
index, commodities, bullion, currency or anything else.
From Currency Derivatives market point of
view, underlying would be the Currency Exchange rate.
• To put it simply an example of Derivatives is curd
which is derived from Milk. Derivatives are unique
product, which helps in hedging the portfolio against
the future risk. At the same time, derivatives are used
constructively for arbitrage and speculation too.

8. BASIC INSTRUMENTS USED & PARTICIPANTS
IN CURRENCY DERIVATIVES
• FUTURES
• OPTIONS
PARTICIPANTS
 Hedgers – Importers, Exporters, Banks.
 Speculators
 Arbitragers

9. CURRENCY - FUTURES
• A currency futures contract is a standardized
version of a forward contract that is traded on
a regulated exchange. It is an agreement to buy
or sell a specified quantity of an underlying
currency on a specified date in future at a
specified rate (e.g., USD 1 = INR 46.00).
(Note: USD is abbreviation for the US
Dollar, and INR for the Indian Rupee)."

10. CURRENCY - FUTURES
• Permitted on
USD - INR
EUR - INR
GBP - INR
JPY - INR
• Currency Futures can be traded through MCXSX, NSE and USE

11. CURRENCY - OPTIONS
• Contract that allows the buyer the right but not the
obligation to buy or sell the underlying at a stated date
and at a stated price
• A call option gives the right to buy and put option gives
the right to sell
• In every currency transaction, one currency is bought
and another sold.
Option to buy USD for INR = USD CALL & INR
PUT Option to sell USD for INR = USD PUT & INR
CALL

12. FEATURES OF CURRENCY OPTION CONTRACTS
•
Standardized exchange traded currency options have the following features:
•
The underlying for the currency option shall be US Dollar – Indian Rupee
(USD-INR) spot rate.
•
The options shall be premium styled European call and put options.
•
The size of each contract shall be USD 1000. The premium shall be quoted in
Rupee terms. The outstanding position shall be in USD
•
The maturity of the contracts shall not exceed twelve months.
•
The contracts shall be settled in cash in Indian Rupees.
•
The settlement price shall be the Reserve Bank's Reference Rate on the date of
expiry of the contracts.

13. EXCHANGE TRADED CURRENCY OPTION
• Standardized with predefined maturity
• Easily accessible in OTC
• Helps during UP & Downs
• Risk management & Cost control

14. PRODUCT SPECIFICATIONS

15. BIBLIOGRAPHY
•
•
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http://www.moneycontrol.com/
http://www.investopedia.com/
http://www.bloomberg.com/
www.wikipedia.com