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1. s
Currency Derivative
A Era of New Revenue

2. Foreign Exchange
Foreign exchange rate
is the value of foreign
currency relative to
domestic currency
Exchange of currencies
is done in the foreign
exchange market,
which is one of the
biggest financial market

3. History of Forex
Britton Wood Agreement found its way into forex history
1944
US Dollar become the new standard of the financial market
IMF (International Monetary Fund) setup to track & monitor
of currencies
World Bank launch setting up International Monetary
stability

4. Exchange Rate
Base Currency
• First currency in a currency pair
Terms Currency
• Second currency in a currency pair

5. Example of Exchange Rate
Base Term Relationship
Currency Currency
US Dollar Indian Rupees (US$ - INR)
British Pound INR (GBP – INR)
Japanese Yen US $ (JPY – USD)

6. Currency Table
USD EUR GBP JPY
USD 1 0.7468 0.6627 99.19
EUR 1.339 1 0.8869 132.66
GBP 1.509 1.1275 1 149.53
JPY 0.0101 0.0075 0.0067 1

7. Factor affecting Exchange Rate
Fundamental Technical Political
Factor Factor Factor
Economy Interest
Speculation
Rates
Government Inflation
Policies Rate
Exchange
Rate Policy
Central
Bank
Intervention

8. Currency Derivative
A Future Contract
Traded on Exchange
To Buy or Sell
Underlying Assets
At A Future Date
On Specified Price

9. Why Currency Future?
Transparency & Efficient Price Discovery
Elimination of Counter Party Risk
Access to all type of Market Participant
Standardized Product
Trading Platform

10. Exchange in Currency Trading
National Stock Exchange
(NSE)
Multi Commodity Exchange
of India Ltd. (MCX)

11. Contact Specification
Underlying USD – INR
Lot Size 1000 USD
Quotation / Price Quote Rs. Per USD
Tick Size 0.25 paisa or INR 0.0025
Trading Hours Monday to Friday (9:00 a.m. to 5:00p.m.)
Contract Trading Cycle 12 month trading cycle
Last trading day Two working days prior to the last business day of the expiry month at 12 noon
Final settlement day Last working day (excluding Saturdays) of the expiry month
The last working day will be the same as that for interbank settlement in Mumbai
Base Price The oretical price on the 1st day of the contract.
Minimum initial margin 3 to 5% of contract value
Extreme loss margin 1% of MTM value of gross open position
settlement Daily settlement: T+1
Final settlement: T+2
Mode of settlement Cash settlement in Indian rupees
Final settlement price RBI reference rate

12. Contact Specification
Underlying EURO – INR
Lot Size 1000 EURO
Quotation / Price Quote Rs. Per EUR
Tick Size 0.25 paisa or INR 0.0025
Trading Hours Monday to Friday (9:00 a.m. to 5:00p.m.)
Contract Trading Cycle 12 month trading cycle
Last trading day Two working days prior to the last business day of the expiry month at 12 noon
Final settlement day Last working day (excluding Saturdays) of the expiry month
The last working day will be the same as that for interbank settlement in Mumbai
Base Price The oretical price on the 1st day of the contract.
Minimum initial margin 3 To 5% of contract value
Extreme loss margin 0.03% of MTM value of gross open position
settlement Daily settlement: T+1
Final settlement: T+2
Mode of settlement Cash settlement in Indian rupees
Final settlement price RBI reference rate

13. Contact Specification
Underlying POUND STERLING – INR
Lot Size 1000 POUND STERLING
Quotation / Price Quote Rs. Per GBP
Tick Size 0.25 paisa or INR 0.0025
Trading Hours Monday to Friday (9:00 a.m. to 5:00p.m.)
Contract Trading Cycle 12 month trading cycle
Last trading day Two working days prior to the last business day of the expiry month at 12 noon
Final settlement day Last working day (excluding Saturdays) of the expiry month
The last working day will be the same as that for interbank settlement in Mumbai
Base Price The oretical price on the 1st day of the contract.
Minimum initial margin 3 To 5% of contract value
Extreme loss margin 0.5% of MTM value of gross open position
settlement Daily settlement: T+1
Final settlement: T+2
Mode of settlement Cash settlement in Indian rupees
Final settlement price RBI reference rate for US$ and EURO

14. Contact Specification
Underlying JPY – INR
Lot Size 100000 YEN
Quotation / Price Quote Rs. Per 100 YEN
Tick Size 0.25 paisa or INR 0.0025
Trading Hours Monday to Friday (9:00 a.m. to 5:00p.m.)
Contract Trading Cycle 12 month trading cycle
Last trading day Two working days prior to the last business day of the expiry month at 12 noon
Final settlement day Last working day (excluding Saturdays) of the expiry month
The last working day will be the same as that for interbank settlement in Mumbai
Base Price The oretical price on the 1st day of the contract.
Minimum initial margin 3 To 5% of contract value
Extreme loss margin 0.7% of MTM value of gross open position
settlement Daily settlement: T+1
Final settlement: T+2
Mode of settlement Cash settlement in Indian rupees
Final settlement price RBI reference rate for US$ and EURO

15. Participants in Currency Market
Importers
& Hedgers
Exporters
Traders Speculators
Arbitragers

16. Strategies using Currency Future
Long Hedge
Example – ABC Ltd a importer
purchase a machinery worth of 10000
$ @ Rs. 46.50 and delivery time of 6
month and payment against delivery

17. Strategies using Currency Future
Date Spot Market Futures
Market
Leg I Contract Value Buy 10 lot
Contract@ 46.60
At the time of contract 10000$ * 46.50 =
46,50,000
Leg II Payment of 10000$ Close position of 10
At the time of delivery @ 47.50 $/Rs lot long @ 47.55 $/Rs
Net Payoff 10000$ * 1 =10000 10000$ * 1 = 10000
Loss Profit

18. Strategies using Currency Future
Short Hedge
Example – ABC Ltd a exporter sold a
machinery worth of 10000 $ @ Rs.
46.50 and delivery time of 6 month
and payment against delivery

19. Strategies using Currency Future
Date Spot Market Futures
Market
Leg I Contract Value Sell 10 lot
Contract@ 46.60
At the time of 10000$ * 46.50 =
contract 46,50,000
Leg II Receive of 10000$ @ Close position of 10
At the time of 45.50 $/Rs lot long @ 45.55 $/Rs
delivery
Net Payoff 10000$ * 1 =10000 10000$ * 1 = 10000
Loss Profit

20. Trading Platform

22. Why to Trade in Currency
Futures?
 Economy of a country denotes currency value
 Very less speculative trading
 Correlation with following markets :
Commodities
International/COMEX Gold Price
•USD/INR depreciation leads to rise in MCX gold prices
International Crude Price
Equities

23. Important Website
rbi.org.in
fedai.org.in

26. THANK YOU