5 things to know about currency derivatives

1.Currency derivatives are exchange traded contracts whose values are derived from the underlying currency.
2.The investor buys or sells specific units of fixed currency on a pre-specified date and rate.
3.Since derivatives are traded in a regulated market there is no counterparty risk.
4.They are mainly used by importers and exporters to hedge against domestic currency fluctuation.
5.Popular currency pairs are USD–INR, EUR–INR, JPY–INR and GBP–INR.


Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.