Wednesday, 5 October 2011

What are Currency Options?-VRK100-05Oct2011

What are currency options?

In July 2010, Reserve Bank of India has permitted stock exchanges to introduce exchange-traded currency options. Persons resident in India are permitted to participate in the currency options market, subject to RBI norms.

At present, currency options are allowed in US dollar-Indian rupee currency pair.

A currency option is a contract where the purchaser of the option has the right but not the obligation to either purchase or sell an agreed amount of a specified currency at a price agreed in advance and denominated in another currency during a specified period of time. This financial derivative is used as a hedging instrument.



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