A Study of Impact of Selected Factors on Currency Derivative Transactions

Abstract

newline Currency Derivatives are contract between buyer and seller whose value is to be derived from the Currency value, in this two currencies are exchanged at a future date at a stipulated rate, it is basically used for reducing and minimising the risk of exchange rate movements. The purpose of this thesis is to study the impact of selected factors (Crude Oil Prices, Currency Rate and BSE Sensex) on Currency Derivative Transactions. In order to attain the objectives of the study, four years data have been considered in which all selected factors and Currency Derivative Transactions amount are considered. A total of twenty-five hypotheses have been formulated and tested in the study. newlineData were subjected to various tools like Linear Regression and Correlation, Multiple Regressions and Correlations, Unit Root Test and Granger Causality Test which were used to address the research aim and objectives. Result of the Linear Regression and Correlation and Multiple Regression and Correlation concludes that p-value is less than 0.05, so there is significant impact of selected factors on Currency Derivative Transactions in both the types of Currency Derivative Transactions i.e. Future and Option. Granger Causality Test result shows that Crude Oil Prices and Currency Rate both affect Currency Derivative (Future) Transactions and BSE Sensex does not affect or cause Currency Derivative (Future) Transactions and Currency Derivative (Future) Transactions does not affect any of the selected factors (Crude Oil Prices, Currency Rate and BSE Sensex). In the next case all the selected factors does not affect Currency Derivative (Option) Transactions and Currency Derivative (Option) Transactions also not affect or cause the selected factors. The findings of the study proves that all selected factors have significant impact on Currency Derivative Transactions. The thesis concludes with the suggestive measures, recommendations for further research, limitations and concluding remarks for the study. newline