Community Forex Questions
Examples of EDSP
Depending on the exchange, the exchange delivery settlement price is calculated in a variety of ways.
The London Stock Exchange (LSE), for example, obtains the EDSP of the FTSE 100 through an intraday auction held on the third Friday of each month. For each security, the auction call begins at 10.10 a.m. (UK time).
The auction's primary goal is to concentrate liquidity in the respective securities and establish a price for the expiring futures and options contracts on the LSE derivative market.
Other exchanges calculate EDSP by taking the average of a derivative's traded price over a set period of time rather than holding an auction.
The Chicago Mercantile Exchange (CME), for example, calculates the EDSP of EUR/USD futures by using exchange rates from 16 major banks. The top and bottom three sets of figures are then discarded, and the average of the remaining exchange rates is calculated, yielding the EDSP.
The London Stock Exchange (LSE), for example, obtains the EDSP of the FTSE 100 through an intraday auction held on the third Friday of each month. For each security, the auction call begins at 10.10 a.m. (UK time).
The auction's primary goal is to concentrate liquidity in the respective securities and establish a price for the expiring futures and options contracts on the LSE derivative market.
Other exchanges calculate EDSP by taking the average of a derivative's traded price over a set period of time rather than holding an auction.
The Chicago Mercantile Exchange (CME), for example, calculates the EDSP of EUR/USD futures by using exchange rates from 16 major banks. The top and bottom three sets of figures are then discarded, and the average of the remaining exchange rates is calculated, yielding the EDSP.
The Exchange Delivery Settlement Price (EDSP) is the official price used to settle futures and options contracts upon expiration. Examples include:
Commodities: In crude oil futures, the EDSP may be based on the average spot price on the expiry date.
Equity Indices: FTSE 100 futures use the index's closing price on the last trading day as the EDSP.
Interest Rate Futures: Eurodollar contracts settle based on the London Interbank Offered Rate (LIBOR).
Agricultural Products: Wheat futures may settle using the average market price over a specified period.
Currency Futures: EDSP for forex futures is often derived from benchmark exchange rates.
EDSP ensures fair and transparent settlement, preventing market manipulation. Exchanges like CME, ICE, and LME determine EDSP based on predefined rules.
Commodities: In crude oil futures, the EDSP may be based on the average spot price on the expiry date.
Equity Indices: FTSE 100 futures use the index's closing price on the last trading day as the EDSP.
Interest Rate Futures: Eurodollar contracts settle based on the London Interbank Offered Rate (LIBOR).
Agricultural Products: Wheat futures may settle using the average market price over a specified period.
Currency Futures: EDSP for forex futures is often derived from benchmark exchange rates.
EDSP ensures fair and transparent settlement, preventing market manipulation. Exchanges like CME, ICE, and LME determine EDSP based on predefined rules.
Jan 05, 2023 03:59