Risk coverage. Futures
Futures contracts are financial instruments which concentrate trading on specific dates, one of whose forms allows for the future purchase or sale of currency.
In reality, use of these instruments by traders is far more restricted than the currency forward or options segment. In fact, in the context of covering exchange rate risk, they do not offer any notable advantages.
The disadvantages are, in fact, fairly significant. First of all because futures are only traded in organised markets and only possess significant liquidity in Philadelphia, New York and, to a lesser extent, London. It was at one point possible to trade futures in Spain for two currencies, the German mark and the US dollar, which accounted for 80% of transactions on the national market.
However, the failure of this market to take off led to its disappearance just two years later. If a market does not generate liquidity, then its chances of survival are minimal. By definition, a market is the place or platform which buyers and sellers use to exchange assets at specific prices. However, if the seller cannot find agents to act as counterparties, then this market is not rationally justified.
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