Investments in Currency Derivatives can help you to diversify your portfolio from traditional asset classes.
Currency derivatives can be described as contracts between the sellers and buyers, whose values are to be derived from the underlying assets, the currency amounts. These are basically risk management tools in force and money markets used for hedging risks and act as insurance against unforeseen and unpredictable currency and interest rate movements. Any individual or corporate expecting to receive or pay certain amounts in foreign currencies at future date can use these products to opt for a fixed rate - at which the currencies can be exchanged now itself. Currency derivative serve the purpose of financial risk management encompassing various market risks. An upfront premium is payable for buying a derivative.
Currency Futures will bring in more transparency and efficiency in price discovery, eliminate counterparty credit risk, provide access to all types of market participants, offer standardized products and provide transparent trading platform.