Part Ⅰ金融英语.pptVIP

In this connection, it should be noted that hedging by means of forward operations is possible even if the underlying transaction is of a medium — or long-term nature. For many currencies, forward deals of more than twelve months are difficult to arrange, but by regularly renewing, say, a twelve-month forward contract at maturity, we can match the hedge with the tenor of the underlying longer-term transaction. True, in such a case one only knows the cost of the hedging for the first period while the costs for the ensuing periods are not known in advance; this, however, need not be a reason for not hedging. It should be pointed out here that, contrary to widespread belief, hedging does not necessarily involve costs. One normally hedges “weak” currencies against “stronger” ones, by selling the former forward, and to many people “weak” currencies are those with a discount; in such cases hedging involve costs. Yet, it has happened many times that the supposedly “weak” currency strengthened, while the supposedly “strong” one (with a premium) declined. 4.2.3 Swaps It contains two simultaneous inseparable contract-deals, the first for spot delivery, and the second (the contrary of spot) for future delivery (in this case your position is squared). Or, in other words: the simultaneous purchase and sale of identical amounts of a currency for different value dates. Swaps can be done for fixed periods: “overnight swap” “tomorrow / next swap” “spot / next swap” “week / end swap” “1, 2, 3, etc. months swap” or for broken periods: 45, 65, 95 days. 4.2.4 Futures Futures are forward transactions which are traded on exchanges, i.e. not OTC (over-the-counter). In order to be marketable on exchanges, futures are standardized in terms of quantity, settlement dates and quotation. While, currency futures have not been able to get established in Europe due to the efficient and more flexible forward exchange business, interest rate futures have achieved some significance. A lot has be