Foreign Exchange
Non-resident investors are free to hedge exchange rate risk from investments through forward foreign exchange or foreign exchange derivative such as currency options and cross currency swap with any licensed onshore banking institutions.
Interest Rates Swap
Financial derivatives transactions generally involve a contract between two parties to fulfill a mutually agreed obligation in the future. Therefore, all contracts need to be legally documented to avoid disagreement or default in the future. As the market volume of transactions increases, a standard document is necessary to act as the terms of reference. The widely accepted market standard is the International Swap & Derivatives Association, Inc. (ISDA).
Hedging of interest rate risks can also be undertaken using the following over-the-counter (OTC) derivative transactions with onshore banking institutions:-
- Interest rate swaps
- Interest rate swaptions, caps and floors
- Bond options
Bond Futures
Interest rate-KLIBOR Futures
Below is the list of MGS futures contracts offered by Bursa Malaysia Derivatives Berhad :
- Underlying instrument is the 3-year MGS. Contract months are four nearest quarterly cycle months (March, June, September and December)
- Underlying instrument is the 5-year MGS. Contract months are four nearest quarterly cycle months (March, June, September and December)
- Underlying instrument is the 10-year MGS. Contract months are four nearest quarterly cycle months (March, June, September and December)
- The 3-year, 5-year and 10-year MGS contracts carry a hypothetical coupon rate of 6%, and the yield is derived from the weighted yields of all eligible MGS in the basket. The weightage is announced by the Exchange. Notional amount per MGS Futures contract is RM100,000. Eligible MGS must meet the specifications of the respective bond derivatives contracts. Upon maturity, all bond derivatives are settled in cash terms using a final settlement value.
The final settlement price is calculated from the final yield in accordance with the following formula rounded to two decimal points.
Price = [(C/Y) [1 - (1 + Y/2)-2N] + (1 + Y/2)-2N] * RM 100
For more information on MGS Futures, please refer to http://www.bursamalaysia.com
- 3-year MGS Futures Contract
- 5-year MGS futures contract
- 10-year MGS futures contract