Abstract

The note provides some of the basic definitions used in futures contracts. It covers in detail the application of futures as a derivative instrument, and how market participants like hedgers, speculators and arbitrageurs use futures. The note also explains the role of the clearing house and settlement procedures in futures contracts, and why the contracts need to be marked to market. The objective of this note is to make the reader understand better, the use of futures as a tool for the purpose of hedging, speculating and arbitraging particularly, in terms of currency and index futures. The note is intended to provide supporting material for case studies/courseware pertaining to currency and index futures.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Currency and Index Futures.

Keywords

Definitions, futures contracts, application, futures, derivative instrument, market participants, hedgers, speculators, arbitrageurs, futures, clearing house, settlement procedures, futures contracts, currency, index , futures