Cross Currency Options Trading in India

 

Cross Currency Options Trading in India- The worth of currencies retains changing about one another depending on a multitude of situations – economic growth, political progress, central bank management, and so on. These fluctuations affect both importers and exporters, whose possessions depend to a substantial extent on the value of the currency.

International trading convenience grants flexibility to the multinational corporations to administer in multiple currencies. The significant currencies that multinational companies or individuals can trade with include the dollar, euro, pounds, sterling, and rupee. The companies having offices in other countries can maintain their bank statements and avail themselves financial services in other countries by international business outwardly any hassle. 

Cross currency options, a new hedging instrument for currency risk management was introduced by the Reserve Bank of India in January 1994. This is a sequel to the Liberalised Exchange Rate Management System (LERMS). With market-determined exchange rates, the management of currency risk has gained importance in India. The introduction of rupee options may prove to be a boon for traders in India. The prerequisites for the rupee option are:

• A stable rupee yield curve
• A liquid rupee-dollar market

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