Reciprocal foreign exchange credit

CurrencySwap, also known as "currency swap", is a contract to exchange the principal and fixed interest of one currency with the average capital and fixed interest of another currency. Different from foreign exchange swaps, currency swaps exchange the principal in different currencies at the beginning of the contract, exchange the interest in different currencies during the contract period, and then exchange the original principal after the contract expires. In some cases, the contract may not exchange principal and interest on the due date, but only pay the net difference. For example, a European enterprise A needs to borrow a US dollar loan. The capital cost of borrowing euros is 4%, and the capital cost of borrowing dollars is 3%. Another American company B needs a euro loan. B The capital cost of borrowing euros is 4.5%, and that of borrowing dollars is 2.5%. The two companies decided to swap the two loans for five years: enterprise A borrowed euros, enterprise B borrowed dollars, and enterprise A used the dollar principal borrowed by enterprise B, and was responsible for repaying the dollar interest during the period and paying the dollar principal when due; Similarly, enterprise B uses the euro principal borrowed by enterprise A to repay the euro interest during this period, and pays the euro principal when it is due. Through the swap operation, the dollar capital cost of enterprise A decreased from 3% to 2.5%, and the euro capital cost of enterprise B decreased from 4.5% to 4%.

In this example, the debt interest rates of enterprise A and enterprise B are fixed. In fact, it is more common for one party to fix the interest rate and the other party to float the interest rate. In view of the different views on the trend of the interest rate market, the two sides are willing to exchange, that is, the party that should pay interest at a fixed rate pays interest at a floating rate for the other party, and the other party pays interest at a fixed rate for itself.

B

The Origin and Development of Foreign Exchange Futures

Foreign exchange futures, which was born in 1970s, is the first financial futures in the world, and its background is the bankruptcy of the Bretton Woods system. So foreign exchange futures are actually the product of the collapse of the Bretton Woods system. After World War II, the Bretton Woods system led by the United States adopted a fixed exchange rate system. The dollar is pegged to gold, and 65,438+0 ounces of gold equals 35 dollars. Countries can exchange dollars for gold at any time. Under the fixed exchange rate system, the foreign exchange market is stable and reliable. Since there is no fluctuation risk, naturally there is no need for hedging, so there will be no demand for foreign exchange futures. However, in the late 1960s, the American economy was stretched, and gold was continuously lost. The United States began to break its word and become fat. 1971August 15, the U.S. government closed the gold window, and the U.S. Treasury stopped converting gold into dollars held by foreign countries. The fixed exchange rate system completely gave way to the floating exchange rate system, and the foreign exchange market has since opened the door to frequent fluctuations. The International Money Market Division of Chicago Mercantile Exchange, established in May 1972, launched seven kinds of foreign exchange futures contracts, which not only opened the prelude to the innovative development of financial futures market, but also achieved great success.

After the emergence of foreign exchange futures, it has been rapidly promoted around the world. 1978 the New York Mercantile Exchange has also increased its foreign exchange futures business. 1979 new york stock exchange has established a new exchange specializing in foreign currency and financial futures. Subsequently, Australia, Canada, the Netherlands, Singapore and other countries and regions also opened the forex futures trading market. 1On September 30th, 982, the London International Financial Futures Exchange (LIFFE) was formally established in London, mainly trading the futures of British pound, Swiss franc, German mark, Japanese yen and US dollar. During the period of 10, foreign exchange futures took root in the major capitalist countries at that time, and thus became an important product in the global futures market, accounting for a certain proportion. According to statistics, in 20 19, the number of forex futures trading transactions including options reached 3.93 billion, accounting for 1 1.42% of the global trading volume.

From a global perspective, the main market of foreign exchange futures is the United States, in which the international money market (IMM) of Chicago Mercantile Exchange and the Philadelphia Futures Exchange (PBOT) are basically concentrated.

In addition, the main forex futures trading-owned: London International Financial Futures Exchange (LIFFE), Singapore International Monetary Exchange (SIMEX), Tokyo International Financial Futures Exchange (TIFFE), French International Futures Exchange (MATIF) and so on. Every exchange basically has futures contracts in which the local currency trades with other major currencies.

C

Foreign exchange futures contract

The Chicago Mercantile Exchange (CME) provides the world's largest regulated foreign exchange trading market, also known as "FX" or "foreign exchange trading". At present, CME*** has 73 kinds of foreign exchange futures and 3 1 options trading. The nominal value of daily transactions exceeds $654.38+000 billion.

Take the euro/dollar foreign exchange futures contract in CME table 1 as an example to explain the foreign exchange futures contract.

Table 1CME Euro/USD foreign exchange futures contract

CME has two kinds of euro/dollar foreign exchange futures contracts: the first one is called "standard contract", and the other one is mini contract introduced later. The difference between the two is that the standard contract is 125000 euros; The mini-contract is only110, which is 12500 euros, and small retail investors can also participate.

In the delivery of foreign exchange futures, there are both physical delivery and cash delivery. Most foreign exchange futures of CME are delivered in kind, and only a few varieties are delivered in cash. Euro/USD futures trading adopts physical delivery.

As can be seen from the contract table 1, the number of listed contracts of the two contracts is quite different. The former has 23 listing contracts, while the latter has only two.

The quotation unit is 1 euro. For example, 1. 18645 appears in the market table, which means that the price of 1 Euro is 1. 18645 USD. Regarding the minimum price fluctuation, the minimum jump point of the standard contract quotation is 0.00005 USD/Euro, so:

The minimum fluctuation of a contract =125,000 euros ×0.00005 dollars/euro =6.25 dollars.

Note that the minimum jump point of continuous monthly spread trading is even smaller, only 0.0000 1 USD/Euro, and the minimum fluctuation of a contract is 1.25 USD. The minimum jump point of mini-contract quotation is 0.000 1 USD/EUR, so:

The minimum fluctuation of a contract =12,500 euros ×0.000 1 USD/EUR = 1.25 USD.

A trader bought 1 standard euro futures contract in CME, and the transaction price was $65,438 +0.32 10. After holding for a period of time, close the position at 1.3250. Regardless of the handling fee:

Profit and loss = (1.3250-1.3210) USD/EUR × 125000 EUR = USD 500.