Definition of Future Market



Future market is a market where futures are bought and sold. Futures are financial contracts to buy or sell an underlying security or asset. The underlying asset or security can be a currency, a commodity or securities even interest rates.

 


If an investor is expecting to receive a foreign currency three months from now and want to hedge against the unfavorable movement of exchange rates. He will have to sell currency futures. The contract will allow him to lock an exchange rate that he will be able to use to exchange the foreign currency after three months irrespective of the spot rate after three months.


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