1. Futures, Options & Money Market Hedges 1.Futures Contracts compared to Forward Contracts 2.Currency Options > Options Vocabulary > Options Dynamics > Options vs. Forwards & Futures 3. Money Market Hedges > On Balance Sheet vs. Off Balance Sheet Derivatives > Deposits (Depos) and Borrowing

2. Futures Contracts compared to Forward Contracts(A) 1.Trading > Futures traded at Futures Exchange (IMM) > Forwards traded by telephone 2.Contract Size > Futures Contract size is fixed > Forward Contract size is any amount 3. Delivery Date > Futures can be delivered only a few days a year > Forwards can be delivered any business day

3. Futures Contracts Compared to Forward Contracts (B) 4. Margins > Futures Exchanges require clients to post a margin as collateral > No margins or collateral required to do forward contracts 5. Credit Risk >The Exchange’s Clearing House is the counterparty for all futures contracts > The credit risk is borne by each party to a forward contract 6. Quotes > Futures quotes use the dollar as the reference currency > Forward Contract quotes follow FX Market conventions