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HI John
Can you please explain the following
Currency Futures:
Sometimes we calculate by; number of contracts X Contract size X the lock in rate
And other times we use the Amount we need to hedge by the lock in rate?Currency Options:
Again, sometimes we use the number of contracts X Contract size and other times we dont?I thought it was due to being traded options that use the number of contract method, however ‘ACCA P4 Question 1 June 2014 ACCA Exam’ under the revision lectures state they are echange-traded and still calculate the futures by the amount payable / lock in rate?
I hope I have made my queiry understandable.
Thank you for your time
For futures we apply the lock-in rate to the contract amount (if the amount of the transaction is different then there is an over or under hedge).
For traded options, then if the option is exercised we apply the exercise price to the contract amount.
This has been done in the question you refer to. Both the futures and the options have been calculated on 38 contracts.
Thank you so much John.
It now makes perfect sense.Thank you for your time , I really appreciate it 🙂
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