Foreign exchange derivatives

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Reference no: EM131495942

When it comes to foreign exchange derivatives,

A forward contract is not considered to be a foreign exchange derivative instrument.

If a currency appreciates above its strike price and a speculator has an American call option for that currency, the speculator can exercise the option and make a profit.

Currency futures contracts are mainly used by large banks while currency swaps are mainly used by individuals through their home computers.

American options is less flexible than a European option when it comes to the right to exercise the option at the strike price.

There is little opportunity for speculators to make money by using currency futures contracts.

Reference no: EM131495942

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