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    Prevailing prices, changing in the same direction, premiums

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    Futures Contracts

    Use the following website to answer the following questions: www.cme.com

    1. Use the above mention website to review the prevailing prices of currency futures contracts. Do today's futures prices (for contracts with the closest settlement date) generally reflect an increase or decrease from the day before? Is there any news today that might explain the change in the futures prices?

    2. Does it appear that futures prices among currencies (for the closest settlement date) are changing in the same direction? Explain.

    3. If you purchase a British pound futures contract with the closest settlement date, what is the futures price? Given that a contract is based on 62,500 pounds, what is the dollar amount you will need at the settlement date to fulfill the contract?

    Use the following website to answer the following question: www.phlx.com/products

    1. Obtain the money currency option quotations for the Canadian dollar (the symbol is XCD) and the euro (symbol is XEU) for a similar expiration date. Which currency option has a larger premium? Explain your results.

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    Solution Preview

    See attached file for clarity

    Futures Contracts

    Use the following website to answer the following questions: www.cme.com

    1. Use the above mention website to review the prevailing prices of currency futures contracts. Do today's futures prices (for contracts with the closest settlement date) generally reflect an increase or decrease from the day before? Is there any news today that might explain the change in the futures prices?

    I have taken 5 currency pair for this part.
    Currency Pair Maturity Price on 11/27/09 Price on 11/26/09 Change in Price
    CAD/USD Dec 2009 0.9410 0.9410 +0.0000
    CHF/USD Dec 2009 0.9934 0.9935 -0.0001
    EUR/USD Dec 2009 1.4967 1.4960 +0.0007
    GBP/USD Dec 2009 1.6492 1.6491 +0.0001
    JPY/USD Dec 2009 0.011524 0.011523 +0.000001

    It can be seen that the USD has declined against all major currencies. USD has become weaker against EUR, GBP and JPY. There was no change against CAD and there was slight strengthening against CHF. The movement in the markets is attributed to an adjustment to the overreaction to the Dubai news:
    ¤ The week started with soaring gold prices, ...

    Solution Summary

    The expert examines prevailing prices and changing in the same directions.

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