Acta Univ. Agric. Silvic. Mendelianae Brun. 2007, 55, 133-142

https://doi.org/10.11118/actaun200755030133
Published online 2014-11-26

The analysis of return on speculative trading with futures contracts of agriculture commodities in the context of the currency risk

Oldřich Šoba

Ústav financí, Mendelova zemědělská a lesnická univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika

The paper is focused on analysis of return on speculative operations with futures contracts from the view of participators not undertaking and undertaking the currency risk. The currency risk is determined by unexpected change of relevant exchange rate (currency denomination of futures contracts / domestic currency of participator). The paper analyses the basic factors influencing the profitability of these operations such as relative change of futures contract value, leverage incidence and relative change of relevant exchange rate. The paper is focused on futures contracts of the world most important agricultural commodities.
The conclusion of the paper for participators not undertaking the currency risk is following: The relative change of futures contract is main factor for the calculation of return on speculative operation. This change is multiplied by leverage incidence finally.
The conclusion of the paper for participators undertaking the currency risk is following: The relative change of relevant exchange rate is not usually relevant for the calculation of return on speculative operation. Main factor is the relative change of futures contract because this change is multiplied by leverage incidence finally but the relative change of relevant exchange rate isn’t.
Neverthless the conclusions of this paper are not valid only for futures contracts of agricultural commodities but generally also for other commodity futures contracts and futures contracts where underlying assets are not commodities but for example financial assets.

References

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