What are the unique features of Indian currency derivative market?
Currency derivatives are the exchange-based, standardized futures and options contracts. The unique features of a currency derivatives are summarized below:
• Hedging tool: Currency derivatives are considered as best hedging tool for importers and exporters
• Smaller contract value: Small investor can enter into currency derivative contract as contract size is in the range of Rs.. 60,000/- to Rs.100,000/- for all four currency pair
• Low margin: Margins in currency derivative is normally in the range of 2% - 4% of contract value
• Low volatility: As compare to equity and commodity derivatives, currency derivatives are less volatile
• Highly liquid market: Good level of liquidity can be seen in all four currency pairs, i.e. USDINR, EURINR, GBPINR & JPYINR
• Longer contracts: In currency derivative market, twelve monthly series future contracts are available for trading
• Synchronization with forex market: Indian currency derivative market is very well interconnected with international foreign exchange market
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