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NISM Series I (Currency Derivatives) study materials
NISM Series I (Currency Derivatives) study resources

NISM Series I (Currency Derivatives) cheat sheet

NISM Series I (Currency Derivatives) · Keep the key ideas within reach.

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Currency Derivatives - Core Mechanics, Pricing and Risk Controls

  • Contract specification on Indian exchanges: USD/INR, EUR/INR, GBP/INR and JPY/INR futures are quoted as INR per unit of foreign currency; JPY/INR is quoted per 100 yen, so a quote of 62.50 means INR 62.50 per 100 JPY.

  • Contract size is USD 1,000 for USD/INR and EUR/INR, GBP 1,000 for GBP/INR, and JPY 100,000 for JPY/INR; tick size is INR 0.0025 for USD/INR and INR 0.01 for EUR/INR, GBP/INR and JPY/INR.

  • Tick value: for USD/INR one tick (0.0025) equals INR 2.50 per contract (1,000 x 0.0025); for EUR/INR and GBP/INR one tick (0.01) equals INR 10 per contract; for JPY/INR one tick (0.01) equals INR 10 per contract (100,000 x 0.01 / 100).

  • Cost-of-carry pricing: theoretical futures = spot x [(1 + INR interest rate) / (1 + foreign interest rate)]^t for continuous compounding, or spot x (1 + r_d x t) / (1 + r_f x t) using simple rates; the currency with the higher interest rate trades at a forward discount.

  • Basis = spot rate minus futures rate (or futures minus spot, depending on convention used); as expiry approaches, basis converges to zero, so hedgers must roll contracts forward to maintain a hedge beyond the near month.

  • Mark-to-market is settled daily in INR; variation margin equals the change in daily settlement price x contract size, and the initial margin plus any maintenance-margin top-up is returned at close-out, so margin is a performance bond, not a cost.

  • Position limits are set by the exchange/SEBI: client-level open interest limits are lower than trading-member limits, and near-month, next-month and far-month limits are specified separately, with all months combined capped.

  • Underlying exposure rule: residents may take positions in exchange-traded currency derivatives only up to their eligible underlying foreign-currency exposure; contracts must be entered into and settled in INR, and delivery of foreign currency does not take place on the exchange.

  • Payoff of a long USD/INR futures position = (settlement price - buy price) x contract size; an exporter expecting USD receipts hedges by selling USD/INR futures, while an importer with USD payables hedges by buying USD/INR futures.