256 CHAPTER 6. THE MARKET FOR CURRENCY FUTURES
(a) Japanese yen?
(b) New Zealand Dollar?
(c) Swiss Franc?- What is the open interest for the September contract for:
(a) Japanese yen?
(b) New Zealand Dollar?
(c) Swiss Franc?- What are the daily high, low, and settlement prices for the December contract
for:
(a) Japanese yen?
(b) New Zealand Dollar?
(c) Swiss Franc?- What is the day’s cash flow from marking to market for the holder of a:
(a)jpyJune contract?
(b)usdJune contract?
(c) gbpJune contract?- What statements are correct? If you disagree with one or more of them, please
put them right.
(a) Margin is a payment to the bank to compensate it for taking on credit
risk.
(b) If you hold a forward purchase contract forjpythat you wish to reverse,
and thejpyhas increased in value, you owe the bank the discounted
difference between the current forward rate and the historic forward rate,
that is, the market value.
(c) If the balance in your margin account is not sufficient to cover the losses
on your forward contract and you fail to post additional margin, the bank
must speculate in order to recover the losses.
(d) Under the system of daily recontracting, the value of an outstanding for-
ward contract is recomputed every day. If the forward rate forgbp/nzd
drops each day for ten days until the forward contract expires, the pur-
chaser ofnzdforward must pay the forward seller ofnzdthe market
value of the contract for each of those ten days. If the purchaser cannot
pay, the bank seizes his or her margin.