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Hello,
I`m struggling with understanding the computation related to the no of contracts for currency futures.
While I was expecting that the no of futures contracts to be computed using September futures price of 0,2378 (because this is the current Sept future price), I see in the Answers that the no of futures contracts is computed based on the lock-in rate (which is the futures price valid @31st August).
My understanding from the AFM OT Lectures was that lock-in rate will be used when computing the result of closure of the futures deal.Many thanks!
AndreeaThe lock-in rate is used to compute the net effect of the futures deal (conversion at spot on the date of the transaction together with the gain or loss on the futures deal).
When calculating the number of contracts there are arguments for using various rates. I always use the current futures rate. The examiner is not consistent. As a result it doesn’t really matter which rate you use (as long as you make it clear which rate you are using) and you will get the marks. (Usually it results in the same number of contracts anyway 🙂 )
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