Question

Spot market, Forward Markets and Futures Markets are common foreign exchange rate market options for managing business risks associated with exchange rate fluctuation with international business partners. How do you decide which market option is best for your business?

Answer 1

I will be selecting the futures market because futures market will be having a very high rate of transparency and it will also provide me with a specialised contracts which are frequently and continuously traded on the stock exchanges so I will be having a option of looking at changing in my exposure and I will also have a very high degree of transparency along with free entry and free exit as I will also have liquidity in future market and there will be various types of strategies which can be adopted which are not available in the spot market and the Forward Market

I will be deciding that future market is based upon that it is highly specialised in nature and it is having a very high degree of transparency and it is also having a very high degree of liquidity so it will provide me with a very high rate of flexibility in deciding upon what exposures to take and what to avoid in order to minimise risk.