A review on pricing of currency futures in Indian foreign exchange market

摘要

This paper attempts to study theoretically the pricing of currency futures and the scope of the available models for pricing. The purpose of this study is to investigate the available literature on pricing of currency futures and understand the empirical analysis employed by various researchers. The thorough review of literature and the study of futures data on National Stock Exchange conclude that in developing countries like India, Athens, etc. the markets are inefficient and thus the future or forward prices become equal to spot prices at the time of expiry i.e., convergence is there. Though this study has not tested the convergence empirically but seeing the pattern of trading and the study on market efficiency in India supports the dependency of two on each other i.e., there is a long run stable relationship between foreign currency spot and futures market.