What is currency derivatives?
Currency Derivative is a contract between buyer & seller agreeing to exchange certain currency at a fixed price in the future date.
‘Derivatives’ means it derives value from underlying asset. From the point of view of currency derivatives, underlying would mean the currency exchange rate.
Example: When the underlying asset is an equity like ICICI Bank, the contract is termed an “equity derivative”. When the underlying is an exchange rate, like US Dollar, the contract is termed a “currency derivative”.
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