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CA Final · Advanced Financial Management · Foreign Exchange Exposure and Risk Management

Which statement about exchange-traded USD-INR currency futures in India is correct?

Indian USD-INR currency futures are cash settled in rupees, with final settlement at the RBI reference rate on expiry. They are standardised and cleared through a clearing corporation, unlike forwards, which are customised, bilateral and often delivered physically.

  1. AThey are settled by physical delivery of dollars at expiry
  2. BContracts are customised in size and date for each client
  3. CThey are cash settled in rupees at the RBI reference rate on expiryCorrect
  4. DCounterparty credit risk is borne bilaterally between buyer and seller

Explanation

Exchange-traded currency futures in India are standardised and cash settled in INR, with final settlement at the RBI reference rate. Physical delivery and customisation characterise forwards, and the clearing corporation, not the counterparty, bears credit risk.

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