Since the 1970s futures contracts have proven a real success story, but in the course of the crisis, several futures-trading businesses went bankrupt. Because of a lack of trust, futures trading volumes started decreasing. But, even though the futures market has been adversely affected, futures contracts still serve as a fundamental risk management tool.
This paper provides an insight into the use of futures contracts in risk management, trading on US exchanges. After a brief introduction to the topic of futures contracts, current literature will be reviewed. The literature review focuses primarily on current issues and developments on the futures market, while the third chapter explains step by step - based on an example of foreign exchange hedging - the use of futures contracts as well as how futures transactions are processes. Finally, the third chapter summarises relevant criteria a company has to reflect when considering to invest in futures contracts.
Inhaltsverzeichnis (Table of Contents)
- Executive Summary
- Table of Contents
- Table of Figures
- List of Tables
- Introduction
- Literature Review
- Problem definition
- Risk exposure
- Exchange of foreign currency at spot rate in October
- Exchange of foreign currency at spot rate in December
- Exchange of foreign currency using FX futures
- Conclusion
- References
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to provide a comprehensive understanding of the role of futures contracts in risk management, specifically focusing on their use in trading on US exchanges. It explores the current state of the futures market, highlighting its challenges and developments. Furthermore, the paper demonstrates the application of futures contracts in risk management through a practical example of foreign exchange hedging.
- The use of futures contracts in risk management
- Current trends and challenges in the futures market
- The application of futures contracts in foreign exchange hedging
- Key considerations for companies investing in futures contracts
- The impact of the financial crisis on the futures market
Zusammenfassung der Kapitel (Chapter Summaries)
The paper begins with an introduction to the topic of futures contracts, highlighting their significance in risk management despite challenges faced during the financial crisis. The second chapter delves into a literature review, focusing on current issues and developments in the futures market. Chapter three provides a practical example of foreign exchange hedging using futures contracts, outlining the step-by-step process involved. This chapter also discusses the criteria companies must consider when deciding to invest in futures contracts.
Schlüsselwörter (Keywords)
This paper focuses on the application of futures contracts in risk management, particularly in the context of trading on US exchanges. Key terms include futures contracts, risk management, foreign exchange hedging, financial crisis, US exchanges, and trading volumes. The paper analyzes the impact of the crisis on the futures market and examines the ongoing role of futures contracts as a crucial tool for risk management.
- Quote paper
- Hedwig Heerdt (Author), 2012, The general use of futures contracts in risk management companies can use trading on US exchanges, Munich, GRIN Verlag, https://www.grin.com/document/207374
