3 Flashcards
1
Q
What are the problems with forwards
A
Counterparties must check each others credit worthiness
Inherently credit consuming
Only people with good credit can use
Cannot be closed out easily prior to maturity
2
Q
What is a futures contact
A
A forward is an obligation to trade in an asset at a predetermined price at a predetermined time
3
Q
What are the key features of futures
A
Available on a wide range of underlying assets
Exchange traded
Specifications need to be define ie what, where, when
Settled daily
Most contacts closed out before maturity
If not usually settled by delivering assets underlying the contract
4
Q
Name 3 common types of users in futures markets
A
Hedgers
Arbitragers
Speculators
