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1.15a

Specia Didï.'Hip. R^lvs ¡SDñ'i a'H o¿rfo on é sel .En ..¿¡t faitt lor the Lf &.. üernjn. Bmien. Prafiih , jr>i J30?riiw CI*TBi|-t¡Ei. Seiner: MCrnälional MdníWir Fund. iftiesjamtÄncm Bai+ raie. D-GOifinmeni raie J-Fioaung raie: InUrJ banc HqfmdBd on ¿1/1L/OO eJU»M U.S. dnln- ai o1 5/1 ]/DQ. I-Fifiaiing. raie, er F st. 22. if-Fic^ruia raie

Specia Didï.'Hip. R^lvs ¡SDñ'i a'H o¿rfo on é sel .En ..¿¡t faitt lor the Lf &.. üernjn. Bmien. Prafiih , jr>i J30?riiw CI*TBi|-t¡Ei. Seiner: MCrnälional MdníWir Fund. iftiesjamtÄncm Bai+ raie. D-GOifinmeni raie J-Fioaung raie: InUrJ banc HqfmdBd on ¿1/1L/OO eJU»M U.S. dnln- ai o1 5/1 ]/DQ. I-Fifiaiing. raie, er F st. 22. if-Fic^ruia raie

Source: The Wall Street Journal, 8 February 2002. Printed with permission from The Wall Street Journal, Dow Jones & Co. Inc.

Exhibit 22.15 lists quotes for a sample of exchange-traded currency futures contracts. These specific instruments are traded at the International Monetary Market at the CME. Each contract follows the convention that the U.S. dollar is the native monetary unit and the foreign currency is the commodity, meaning that all prices are quoted using the direct method. Also, notice that these contracts are standardized to deliver a set number of units of the foreign currency on a specific date in the future. For instance, the March Mexican peso contract negotiated on that date required the long position to purchase—and the short position to deliver—500,000 pesos at the price of USD 0.10853 per peso. By convention, all currency futures on the IMM mature on the third Wednesday of the stated delivery month and can be settled with a wire transfer of the foreign currency. Notice that the dollar traded at a substantial forward premium to the peso at this point in time.

Interest Rate Parity and Covered Interest Arbitrage A key concept in FX risk management is interest rate parity, a condition that specifies the "no-arbitrage" relationship between spot and forward FX rates (as priced into the futures contracts) and the level of interest rates in each currency. This connection is best seen through an example. Suppose that an institutional investor has USD 100,000 to invest for one year and is considering two different risk-less alternatives. The first strategy entails the purchase of a U.S. Treasury bill. Assume that under current market conditions, the effective U.S. dollar risk-free interest rate is 4.50 percent per

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Retirement Planning For The Golden Years

Retirement Planning For The Golden Years

If mutual funds seem boring to you, there are other higher risk investment opportunities in the form of stocks. I seriously recommend studying the market carefully and completely before making the leap into stock trading but this can be quite the short-term quick profit rush that you are looking for if you am willing to risk your retirement investment for the sake of increasing your net worth. If you do choose to invest in the stock market please take the time to learn the proper procedures, the risks, and the process before diving in. If you have a financial planner and you definitely should then he or she may prove to be an exceptional resource when it comes to the practice of 'playing' the stock market.

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