Question
a) Explain a foreign currency futures contract and outline the differences between futures and forwards. b) The Chicago Mercantile Exchange (CME) and the New York
a) Explain a foreign currency futures contract and outline the differences between futures and forwards. b) The Chicago Mercantile Exchange (CME) and the New York Board of Trade (NBOT) operate futures markets in currencies in the following pairs US$/pounds and US Dollar/Pound. The value standardize size of a sterling futures contract is 6,500 pounds. Describe how a UK company that expects to received US$800,000 in three months time can use a futures contract to hedge transaction exposure if the following apply i) Currency spot rate US$ 1.64/pounds - US$1.68pounds ii) Sterling futures price US$1.64/Pounds
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