Currency contracts???

[clylbw]

Recent circumstances have prompted me to look into FX and realise what a complete novice I am in this area . Can anyone please help me with the following:

1. Types of currency contracts: spot, forward, future, swap. Anything else?

2. Is any type of the contracts non-deliverable at the time of maturity? If so, is it settled by cash?

3. Is one type of contract considered to best reflex the market expectations?

4. If so, is it the one-year forward contract? Why does it best reflex the market expectations?

Thanks really.

 

[Anonymous]

1. options

2. CFD's, spreadbets, you mean?

3. ?

4. A one-year forward sometimes is referred to by ,maybe journalists, as "market expects" prices to be there. I have no idea what they mean by "market expects", whom do they mean by "market", each writer or specialist or professional may have a different interpretation.

 

[JP1966]

Journalists do sometimes write the markets expects a rate to be x in 12 montsh time but this phrase is wrong. It is merely an arithmetic calculation based on the 2 currencies one year interest rates. For example if one year sterling rates were 4.50% and dollar one year rate was4.0% then the one year forwrd rate would be exactly 0.5% less than the spot rate. If it was not you could arb the 2.

 

[neil]

Try Knowledge Lab tab

Recent circumstances have prompted me to look into FX and realise what a complete novice I am in this area . Can anyone please help me with the following:

1. Types of currency contracts: spot, forward, future, swap. Anything else?

2. Is any type of the contracts non-deliverable at the time of maturity? If so, is it settled by cash?

3. Is one type of contract considered to best reflex the market expectations?

4. If so, is it the one-year forward contract? Why does it best reflex the market expectations?

Thanks really.

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[clylbw]

Thank you indeed.