📝 One-liners · 66 cards
FOREX DERIVATIVES
What is a currency forward contract?
A currency forward contract is a binding agreement to buy or sell a specific amount of foreign currency at a predetermined exchange rate on a specified future date. It is used to hedge against adverse exchange rate movements.
What is a currency swap used for in international banking?
To exchange principal and interest in different currencies between two parties.
How does a currency futures contract differ from a forward contract?
Currency futures are standardized contracts traded on organized exchanges with daily mark-to-market settlement, whereas forward contracts are customized OTC agreements settled only at maturity. Futures require margin deposits while forwards do not.
What is a forward rate agreement (FRA) in forex derivatives?
A contract to lock in an interest rate for a future period on a notional amount.
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