ECON 351 Chapter 7: Chapter 7_Derivatives and Derivative Markets.docx

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21 Feb 2014
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Forward and future contracts in foreign exchange. Traders agree today to a forward contract to exchange currencies or. Forward transactions bank deposits at a specific future date at an exchange rate known as the forward rate: forward contract on any future date. contracts are bought and sold on the exchange. Traded on exchanges such as cbot and price changes continually as. Private agreements among traders to exchange any amount of currency: future contract. Option a type of derivative contract in which the buyer has the right to buy or sell the underlying asset at a set price during a set period of time. Option premium the price of an option. Strike price or exercise price the price at which the buyer of an option has the right to buy or sell the underlying asset. Appreciation an increase in the value of a currency in exchange for another currency.

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