International Finance

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5. Foreign Currency Futures Futures contracts are designed to minimize the problems arising from default risk and to facilitate liquidity in secondary dealing. In the United States, the most important market for foreign currency futures is the International Money Market (IMM) of Chicago, a division of the Chicago Mercantile Exchange. The best way to understand these contracts is to compare them with forward transactions. Like forward contracts, currency futures contracts are, in principle, contracts to deliver a given amount of currency on a given date and at a pre-specified price to be paid later on. Like forward contracts, futures contracts have a zero initial market value: neither the buyer nor the seller has to pay anything…show more content…
Open High Low Settle Change Lifetime High Low JAPAN YEN (CME)  12.5 MILLION YEN; $ per yen (.00) Sep .9458 .9466 .9386 .9389 -.0046 .9540 Dec .9425 .9470 .9393 .9396 -.0049 .9529 Mr94 …. …. …. .9417 -.0051 .9490 .7945 .7970 .8700 Open Interest 73,221 3,455 318 Est vol 28,844; vol Wed 36,595; open int 77,028, + 1,820 The first line shows the size of the contract (12.5 m yen) and states that the prices are stated in USD cents. The June 1993 contract had expired, so the tree contracts being traded on 29 July 1993 are the September and December 1993 contracts, and the March 1994 contracts. Note that there was no trading on the March 1994 contracts for that day. The different headers are: Open: The price at the start of trading on 29 July. High and Low: The highest and lowest transaction prices on 29 July. Settle: The settlement price on 29 July (representative of prices around the close). Change: The change in the settlement price between 28 July and 29 July. Lifetime High and Low: The highest and lowest prices during the life of the contract. Open Interest: The number of outstanding contracts (note: trading is concentrated in the nearest maturity contract). The last
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