How to use futures contracts to hedge currency risks?
Futures contracts consist in the obligation to buy or sell an underlying asset at a price and quantity pre-determined at the trade date. Forward contracts are derivative instruments privately negotiated at an over-the counter market and are tailored to meet the needs of the two contracting, said Elena Marchidann, head of development department at BSE. “The two contracting parties are bound by this agreement to buy (long) and to sell, respectively (short) an underlying asset to be delivered in the future at a price and quantity pre-determined at the initial trade date”, she explained. The futures contracts are in fact standardized forward contracts that are traded at a regulated market. These instruments are highly leveraged from OTC market instruments, such as organized trading overseen by National Securities Commission. “The derivative market benefits of the mechanisms specific to market makers as to secure the cash in the market. RBS Romania is the first bank in the country that will
