1. Currency Forwards

2. Currency Forwards
Financial assets: loans, shares, bonds, foreign currency etc.
Fluctuating prices of financial assets and risk
Risk faced by importers of goods
Risk faced by exporters of goods

3. Financial Derivatives
Risk associated with financial assets: fluctuating prices
Evaluation of financial derivatives
Instrument to hedge the risk
A financial derivatives has underlying assets, that is, financial derivatives is evolved to hedge the risk involved in dealing in a particular financial assets
Value of financial derivatives is derived from the underlying assets
Value of derivative security is derived from the value of underlying assets
Forward, futures and options
Exchange-traded derivatives
Over-the counter derivatives

4. Forwards Part of daily life
Forward contracts are commitments entered into by two parties to exchange a specified amount of money for a particular good or service at a specified future time
Price, delivery date and quantity are decided at the time of initiating the contract, but the actual payments and delivery of the assets take place later.
Delivery price
Delivery date
Real Estate
Gold
Foreign currency

5. Hedging of Foreign Exchange Risk through Currency Forwards
Foreign exchange risk faced by importers and exporters
Hedging risk through forward contract

6. Speculation using Currency Forwards
Speculators are profit seekers
Exchange rate fluctuations provide opportunities to speculators for making speculative profits
Currency forwards are also used by speculators to make speculative gains
Forward exchange rates are quoted at a premium or discount to the current exchange rate or spot rate

7. Currency Forwards and Banks
Spot sale or purchase
Offsetting forward sale or purchase
Making use of future and options

8. Thanks