ASSIGNMENT NAME- INTERNATIONAL FINANCIAL MANAGEMENT.
A Report to the Finance Director of Quick Nourish Plc. Supermarket. Chain (QN) for presentation to the Directors to address concerns raised at the recent Board Meeting
DATE: 3RD MARCH 2014
NUMBER OF WORDS—2,500 WORDS.
TABLE OF CONTENTS PAGES
1. Introduction -------------- 2
2. Body of Report -------------- 4
3. Conclusion -------------- 7
4. Appendices ---------------
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According to Luenberger (1998), forwards are commonly used by big MNC’s to hedge their foreign currency position and futures are commonly /often used or traded by small firms and speculators who hope to capitalize on their expectation of exchange rate movements. Both are similar in practice in terms of their obligation. They do have however specific features. Forwards are private contracts, while futures are traded on an exchanged market, forwards are not standardized but futures are standardized. In forward there are limited ranges of delivery dates while in currency futures there are wide ranges of delivery dates and settlements are done daily. While settlements are at a maturity date and final cash settlement for forwards. Margins are not always required for forward contracts but are imposed on for futures contracts. Corporations that have established relationship with large banks tends to use forward contract rather than futures contracts because forward contracts are tailored to the precise amount of currency to be purchased or sold in the future and the precise forward date that they prefer. Conversely, small firms and individual who do not have established relationship with large banks or prefer to trade in smaller amounts tends to use currency futures contracts. Jeff, M. & Roland. (2011). Forward contracts are self-regulating while futures are regulated by Commodity futures trading commission; National Futures Association. There are no cost