2. Non-deliverable forwards
ReasonsforexecutingNDF
Summary
Introduction
History
MarketSizeandLiquidity
Financialinstruments
Speculation
Featuresof FXmarket
WhypeoplechooseFX market
MarketParticipants
Interestrateparty
Partyconditions
Violationof IRP

3. Introduction
Foreign exchange marketare that marketwhichexchange of onecurrencyfor anothercurrency

4. Individuals, firms and banks
With the help of telecommunication
Every single currency
Foreign currency for other currency
Most liquid financial market
24 hours market

5. No centralized location
 Large and most liquid market
 Speculation, hedging and arbitrage
 Quote driven market
 24 hours market
FEATURES OF FX MARKET

6. WHY PEOPLE CHOOSE FX MARKET
Large volume trading
 Easy of entry
 High chance of profit
 24 hours market
 Low fees cost

7. Market participants
 SPOTMARKET
 Commercial banks
 Brokers
 Customers of commercial and central bank
 Corporations/ companies international

8.  FORWARDMARKET
 Arbitrageurs
 Traders
 Hedgers
 Speculators
Market participants

9. History of Foreign Exchange Market
4th century
Medieval and later
15th century
the Medici family
1704
Kingdom of England
County of Holland
Early modern
Modern to post-modern
WWII - Markets close - After 1973

10. Market Size and Liquidity
reign exchange market turnover, 1988–2007, measured in billions of USD.
Bank for International Settlements
outright forwards, swaps and other derivatives
1998 - $1.7 trillion 2010 - US$3.98 trillion April 2013
United Kingdom - 36.7%
United States - 7.9%
Japan - 6.2%.
Singapore surpassed Japan
$383 billion per day
United Kingdom (41%)
United States (19%)
Singapore (5.7)%
Japan (5.6%)
 Hong Kong (4.1%)

11. Financial instruments
Spot
Forward
Swap
Futures
Option
TOMM
NDF
 Cash

12.  No arbitrage condition
 forward exchange and spot exchange rate
 Expected rate of change = interest rate of the exchange rate differential
INTEREST RATE PARITY

13. RATE OF RETURN IN LOCAL
CURRENCY
=
RATE OF RETURN IN FOREIGN
CURRENCY
MATHEMATICALLY

14. If IRP is violated, then an arbitrage
opportunity exists.
VOILATION OF iRP

16. Cash-settled , short term
forward contract.
NDF market is an OTC
market.
Contract traded on non-
convertible foreign
currency
NON DELIVERABLE FORWARDS

17. Calculated by taking the difference
between exchange rate and spot rate
Typically quoted with the USD as the
reference currency, and the
settlement amount is also in USD.

18.  Speculation
 Hedging
REASONS FOR EXECUTING NDF

19. CONCLUSION
 Aniket Waje
 WilonaTuscano
 AmeeRathod