Forex Finisher

Saturday, January 20, 2024 3:48 PM

Forex Finisher
Starting with the name of Allah the best planner and well doer L12-P1 : L13-P1 : L14-P1 : L15-P1:
Now understanding some important terms involve in future INTEREST RATE CONVERGENECE:::Aesa question exam Interest Rate Options::: Up till now we have seen IRF FRA and options for the
contracts mein aa skta hai jismy hamein aik do month ka rate bataya These are not exactly options which we will study in FINAL hedging of borrowing but the matter of fact is that we can
Interest Rate Future:(IRF) Future sell :> Also known as Borrowing:::This rate should be gya ho aur hamein ussey future ka rate find krna ho these are basically interest rate guarantee use these instruments for hedging our investments from
Interest Rate Future is hedging less if we are following gains 31 Jan @ 85 Theme:::In FRA we fix a rate on which we will get interest future losses…
instrument in which hedge our future risks to rates takae Future Buy :> Also known as investing:::This rate should be 28 Feb @ 84 irrespective at maturity of FRA we are having loss or gain… IRF & investment::: we can invest in IRF for this we will
borrower ki borrowing aur investor ki investing cost balance more if we are following losses 31 March @ ?(assume:::83) but what if a person want to opt to go with spot or with firstly BUY and then SELL…All other steps will remain same.
rahay takae dono ko loss na ho… rate fixed then in this senario we will go for options…option
Futures rates are quoted in 100-%age sense like if rate is 13% L13-P3 : ki game yae hai kae hm log aik rate set kr lety hain aur phir
L11-P1 : we will quote it like 87(100 - 13) In questions of IRF a most complex question of rate at maturity its our choice to exercise that option or
- S1::::Assume that kae hamein loan chaiye tou hm aik kaam convergence and amount adjustment::: not…we have to pay premium either we exercise or we go
karein gai kae hm exchange kae paas chalay jaein gai aur L12-P2 : Step 1::: Find Basis Difference with spot
unko bolein gai kae hamein 3 months kae liye rate hedge We lock a rate on a specific date in future and then sell Step 2::: Find Future maturity days
krwana hai tou after 3 months hamein loan mil tou jaye ga future contracts means borrow amount when future Step 3::: Find Days before maturity date L14-P3:
but us loan ko hmny 3 months mein repay krna hoga hr become mature and we then buy futures means we invest Step 4::: Find Difference of days Commodity Futures means wo futures jismy hm
surat with interest aur interest ka rate day 1 pai tae hojae ga amount on spot and then earn through net changes Step 5:::Predict rate form those days commodities ko hedge krty hain…
Step 6::: Calculate gain from Hedge setup Futures hamesha close out hoty hain
- S2::::Assume that hmny kahein investment krni hai aur hm
chahte hain kae jis din investment krni hmny uss din rate km
L12-P3 : IMPORTANT Step 7:::Adjust amount according to exchange & contract Futures hamesha close out hoty hain
size Futures hamesha close out hoty hain
na hojae jiski wajah sai hamein loss ajae so hm aik rate fix In this part of lecture original theme is explained::::Basically
Step 8:::Find Total gain according to amount adjustment Hm future mein cheezein bechty hain like agar hamein lgta
krwa lety hain exchange sai kae iss rate pai mein falan din sir has explained that hm log exchange sai apny losses kessy
Step 9:::Take loan on spot and net it with gain (This will hai kae yae cheez in future mehngi hojae gi aur hmny wo
investment kroun ga so phir hm after 3 months for 3 hedge krty hain like hm exchange pai speculate krty hain aur
eventually reduce the cost of interest) cheez khareedni ho tou hm in fututre usko hedge kr lery
months aik aessy rate pai paisa invest krty hain jo hamein future sell krny kae liye future ki aik price lock krwa lety hain
hain and vice versa
day 1 pai pata hota hai aur jb future mature hota hai tou exchange uss borrowing
L13-P5 : Ab agar iska opposite hojae tou hamein nuksan bhi hoskta
ko spot rate pai invest kr deta hai aur phir uss buy aur sell sai
Concept of tick:::Interest rates are generally quoted upto 2 hai
net loss/gain arrose hota hai…
L11-P2 : Phir hamein tou loan chaiye tha pr exchange tou loan na he decimals after decimal point and lowest possible change
- S3::::Key Dates & Key Rates tou deta hai aur na he leta so hm aik commercial bank sai interest rate is 0.01% and so we called this as tick size and is L14-P4:
:>Future contract open means jis din hmny rate lock in loan lae lain gai aur jitna rate hamein ziada ya km lagay ka known as tick… Total gain from this known as tick value Commodity Forwards mein hm aik price decide kr lety hain
karaya wo exchange kae gain/loss ki wajah sai cover hojae ga kae iss price pai cheez bechain gai ab jb wo date aaie gi tou
:>Future contract close(mature) means jis din hamein lock hm cheez bechain gai he bechain gai no closeout no chindi
in rate pai loan mil gya
(LOAN HAMESHA 3 MONTHS LA MILTA HAI) L13-P6 :
Concept:::Aik percent mein 100 ticks hoty hain like if there is chori no other way we will go ahead and will deliver good
:>Loan contract open means jis din FC mature hogya and take decided cash vice versa
:>Loan contract close(mature) means jis din loan contract
L12-P4 :(This chunk is enough to revise all concepts of IRF) a change of 1 % it will be considered as 100 tick change and
mature hojae 3 steps: answer from both methods is equally right and same …
1st step:::Sell L14-P5:
- S4:::: Rate Convergence: 2nd step:::Buy L13-P7 : Theory of Forex:::Business arrange equity and debt to
Difference in start of future contract between spot and 3rd step:::Spot pai loan(From Commercial Bank) Steps involve in solving question from tick method::: arrange assets of its company at a lowest cost so 1st
future rate gradually decreases as maturity date come Step 1::: Find Total Ticks(in 1% we have 100 ticks) objective of business is to arrange capital at a reduced cost
closer and the difference analysis between spot and future L12-P5 : Step 2::: Find Tick value then 2nd objective of a business is to payoff its liability
rate reports that future always mimic spot and at the end at Step 3:::Adjust amount accordingly and make contracts because if liabilities are not timely payoff it will put (?) on
ACCA question Solve
the day of maturity Spot and Future rate became same… number accordingly the honesty of company
- Spot pai future ka aur spot ka rate same hota hai but
question jessy boly wessy he krna hai Step 4:::Calculate net gain/loss
L11-P3 : Step 5:::Borrow loan on spot from commercial bank
Speculation Business:::Kuch log future pai aik rate lock krwa Step 6:::Net interest and gain/loss and calculate effective
dety hain and phir jb loan leny kae din agar rate agar spot interest rate
pai ziada ho tou amount ko borrow krke invest kr dety hain
and ussey paisay kamate hain…
In speculation business we lock loan rate on very first day
and then then on maturity of future we invest that
amount…

L11-P4 :
Exchange never give or take loan its just speculation and we <-----------------------------------------------------------------------> <----------------------------------------------------------------------->
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only get net loss or benefit we make contract with
exchange for getting loan on a specific rate in future and on
date of maturity exchange invest that amount on a spot
rate and transfer net amount in our account hedging losses
this is also known as close out

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