Looking at old CFA test from 2008 and got mad confused on currency futures from AM question 11.
Could someone explain the very basic mechanics of a currency future transaction? Ie let’s say you have a “dollar futures contract, size = 100,000 USD, JPY/USD”. What does long/short and buy/sell mean in terms of what exchanges hands at expiration to/from each side?
Sometimes the most basic things trip me up, and the book doesn’t spell out things like you’re a 5 yr old!
Got it. So, if the quoted rate was USD/Yen, would it be a Yen futures contract then, and being long means you’re receiving Yen? Or is the currency you’re receiving independent on how the exchange rate is quoted for the contract?
In other words, if you are long a dollar futures contract quoted: JPY/USD say = 100.5, you want that number to increase, to say 101.5 (appreciating dollar, depreciating yen) in order for that futures contract to make money.