Bond and Derivatives Market Innovations

1. Introduction In today's global and hypercompetitive business environment, many companies are forced to diversify their source of funding, particularly when future growth is intended. A successful firm expansion requires "fueling" from various funding supplies, besides the ordinary sales revenues. These alternative financing sources, which are needed by the firms, are provided by the financial system. The demanded financial products are created by intermediation, which is truly the most important role of the financial institutions. They …

…on this foreign exchange transaction. After the agreement has been agreed upon and the expiration date fixed, the company has two options: to wait for the expiration date to come and then cash out or cash out in a meanwhile if there is any opportunity that provides higher return at the end. Firms use these futures contracts when they are engaged into such, because they offer adaptability and low default risk, affirmed by the clearinghouse.