Currency Futures

• India’s first-ever exchange-traded currency

futures market Launched on August 29, 2008
• Currently traded in major exchanges
• USD, Pound, Euro and Yen contacts allowed
for trading
• Standardized contracts
• Maturity up to 12 months
 The NSE Currency Contracts
• Monthly cycle: Jan, Feb, Mar…..
• Delivery date 3rd Wednesday of delivery month.
• Last trading day is the second business day preceding the delivery day.

Feb Mar Apr May

• Standardized Contracts
– US Dollar 1000
– Euro 100
– British Pound: 1000
– Japanese Yen: 100,000
 Futures pay-Offs
profit

0
Rs 67/$

loss
 Rupee Currency Futures

• Pricing currency futures with continuous

compounding:
(r −r f )T
F = S0 e
With rupee not convertible, demand/supply factors will also
influence
 Futures and Expected Spot
• Depends on speculators and hedgers, if they
are net long or net short
– If speculators are net long, and hedgers are net short, the
futures price would be higher than the spot
– If speculators are net short, and hedgers are net long, the
futures price would be lower than the spot
Convergence of Futures to Spot Prices

Futures
Spot Price
Price
Spot Price Futures
Price

Time Time

(a) (b)
Thank You