The names “Forward Contract” and “Forward Rate Agreement” (FRA) may sound similar, but they play distinct roles in financial markets, differing in key characteristics and functions. Let’s explore the main differences between these financial instruments. Elements Forward Contract Forward Rate Agreement (FRA) Parties in the Contract Forward contracts are agreements between two parties — buyers…
Currency derivatives are exchange-based futures and options contracts that allow those with a significant exposure to imports or exports, use these contracts to hedge against their exposure to a certain currency. In India, one can use such derivative contracts to hedge against currencies like US Dollar, Euro, U.K. Pound and Yen so as to manage…
Derivatives are financial instruments whose value is derived from an underlying asset or a group of assets. These assets range from stocks, bonds, commodities, currencies, interest rates, or market indices. The derivatives market is a financial marketplace where derivative contracts are bought and sold. Major Users of Derivatives Financial derivatives are used for several purposes,…
A swap is a derivative contract where two parties agree to exchange cash flows or liabilities from different financial instruments over a set period of time. In the other words, a ‘Swap’ is an act of exchanging one thing for another. In derivative market, currencies swap, interest rates swap or commodities swaps are most common. The…
(Look here for repatriation of money abroad from the Sale of property purchased from funds remitted from overseas OR NRE/ FCNR accounts, Sale of property purchased from Rupee Source (while resident in India), Sale of property acquired through inheritance, etc, and permissible sources of funds for an online/offline transfer abroad from an NRO Account .)…
A forward contract is an agreement between two parties to buy or to sell an asset at a specified price on a future date. For example, in foreign exchange market ‘forward contract’ means an exchange agreement between two parties to deliver one currency in exchange for another currency at a forward or future date. Futures…
In a layman’s language, derivative means profit or loss derived from something. The most common derivative instruments used in financial markets are the forward contract, options, forward rate agreement, futures contract, interest rate swaps etc. The characteristic and value of these derivative instruments are derived from underlying assets like currencies, Interest rates, stocks indices, precious…
Derivatives are financial contracts that derive their value from an underlying asset. These contracts play a significant role in the financial markets and exhibit several key characteristics and functions. Characteristics of Derivatives Hedging Hedging involves purchasing one asset to reduce the risk of loss associated with another asset. In finance, this risk management technique focuses…
In today’s Budget 2025 presentation, Finance Minister Nirmala Sitharaman announced several development measures across six key areas, focusing on the poor, youth, farmers, and women. Key Focus Areas Major Announcements on Taxation, Business Growth, Infrastructure, and Fiscal Policies To know the tax slabs for FY 2025-26, read: “NO INCOME TAX ON INCOME UP TO ₹12…
Options are contracts through which a seller gives a buyer the right, but not the obligation, to buy or sell a specified asset (Ex: Foreign currency, shares, equities, commodities etc.) at a predetermined price, by a certain date. It means they acquire or dispose of the underlying asset at that price called the strike price.…
