Long hedging refers to those who are short in the spot foreign exchange market, that is, those who have foreign currency liabilities, who make corresponding buying transactions in the forward foreign exchange market to prevent the exchange rate from rising when paying foreign currency in the future.

The following example illustrates the principle of long hedging.

American importers expect to pay 25 million yen for imported goods after three months, and the spot exchange rate is 1 USD = 146.70 yen. In order to avoid having to pay more dollars to change into Japanese yen due to the appreciation of Japanese yen three months later, importers buy two Japanese yen futures contracts due in September in the forward foreign exchange market for long-term hedging. The specific operation process is shown in the table: spot market futures market 20XX June 65,438+.

The spot exchange rate on that day is 1 USD = 146.7.

Japanese yen, 25 million yen value 1704 16.

Dollar, it is expected that the yen may appreciate.

20XX June 10

The spot exchange rate on that day is 1 USD = 142.35.

Japanese yen, 25 million from the spot market.

Japanese yen, value 175623 USD 20XX June 10.

Buy two Japanese yen futures contracts due in September, each with an amount of

12,500,000 yen, with the transaction price of 0.006835 USD/yen, and

The quotation method in the forward foreign exchange market is 6835 points, which is used outside the bank.

The foreign exchange quotation rule is 146.30 yen/USD.

20XX June 10

Sell two Japanese yen futures contracts due in September, and the transaction price is

7030 points (inter-bank foreign exchange rate 142.25 yen/

Dollar) cost increase

175623 ——170416 = $5207 profit.

(7030-6835) ×12.5× 2 = US$ 4,875 The table shows that when the importer actually paid Japanese yen three months later, he had to pay an extra US$ 5,207 due to the appreciation of the Japanese yen exchange rate. However, because he also hedges long positions in the forward foreign exchange market, the increase in cost can be roughly compensated by the profit in the futures market. Of course, if the yen exchange rate falls in September 10, the gains from the cost reduction in the spot market will be roughly offset by the losses in the futures market.

Speculative trading in foreign exchange futures is a trading behavior that buys and sells foreign exchange futures contracts, gains profits from changes in foreign exchange futures prices, and bears risks at the same time. Foreign exchange futures speculation can be divided into long speculation and short speculation from the position of speculators. Foreign exchange futures arbitrage trading refers to the trading behavior that traders buy and sell two related foreign exchange futures contracts at the same time, and then hedge the contracts in their opponents at the same time, so as to profit from the relative price changes of the two contracts. The arbitrage form of foreign exchange futures is roughly the same as that of commodity futures, which can be divided into cross-market arbitrage, cross-currency arbitrage and cross-month arbitrage.

To sum up, the existence of forward foreign exchange market provides a place for many economic entities to avoid exchange rate risks. Although it is impossible for forex futures trading to completely eliminate all risks in various trade and financial transactions, it has at least reduced most risks and increased the operational stability of economic entities. At the same time, due to the standardization of contract terms, the forex futures trading market has good liquidity, simple transaction procedures and low cost, and risks can be avoided by paying a small amount of margin, thus saving the capital cost.